by Michelle Z. Askeland Value-add properties are as in demand as ever, making the market a reliably competitive asset class for mul- tifamily investors across Colorado. In general, a value-add opportunity represents a multifamily asset in which a new investor or owner can come in, spend money upgrading the property and then generate higher rents.The examples of added value are end- less and shift with the times. Current popular moves include bathroom and kitchen upgrades (new cabinets, countertops, appliances), new floors (wood instead of carpet), updated color palettes, and enhanced community areas (creating new amenities in excess space, updated fitness centers and nicer outdoor areas – fire pits, grills, patio furniture, etc.). “Value add is anytime you can spend money to make money, upgrade a property to compete with newer prod- uct and achieve higher rents,” said Matt Barnett, senior vice president with CBRE Capital Markets, Multifam- ily Investment Properties. “It’s really being able to reposition a multifamily property to be more comparable with what’s being built or the next-genera- tion newer.” A value-add property comes in all vintages – from the 1970s up to the 2000s – and in all locations. Even those built in 2009 or early 2010 – a relatively small number – can be pitched as value add, but generally it’s assets from 2002 or older, said Shane Ozment, principal with ARA, A Newmark Co. “The popularity of the value-add strategy has been very, very successful, regardless of vintage of the property – the rising tide has lifted all ships here in Denver,” Barnett said. “But due to the success of that strategy – there’s been more money raised for value add than any other type of investment strategy for multifamily. So, that is what is ulti- mately pushing pricing and compress- ing the yield – there’s a lot of money out there with this strategy in mind.” Another important component of these properties is that even if an older property is partially or fully renovated, it could still be sold again, touting itself as a “value add.” Properties that were renovated seven or eight years ago can qualify as value add to be re-renovated. “Tastes and styles change,” said Bar- nett. “It doesn’t necessarily have to be a deep dive that needs to be done – it could be anything from color scheme to countertops and different appliances that can all make the difference. So, there’s plenty of opportunity.” While the level of investor inter- est hasn’t changed, the difference in today’s market is that the dynamics of the multifamily market has changed, Ozment said. Amajority of the market was built from 1972 to 1974, then there wasn’t much activity until 1984 to 1987. CBRE Aurora Hills Apartments, a 600-unit property built in the early 1970s, received 15 offers in late 2017. Even though the property was partially renovated, the new owner, Oak Coast Properties, is plan- ning an additional $2.5 million in upgrades. Please see Page 30 Value-add market continues its competitive pace INSIDE An examination of Denver’s multifamily conces- sions reveals some positive news for renters. Denver concessions PAGE 8 A new reoccurring spotlight surrounding affordability in Colorado kicks off this issue. Affordable housing PAGES 32-35 With the multifamily construction boom, is the city leaving quality design behind? Design complaints PAGE 24 February 2018