CREJ

Page 6 — Multifamily Properties Quarterly — May 2022 www.crej.com Market Update Community Hospital in Grand Junction retained Gershman Investment Corp and AMS Health Care Mortgage to construct a new 130,000 square foot four-story Medical Office Building and state-of-the-art regional cancer center that is attached to the main hospital building. The $73,884,500 FHA Insured Mortgage was funded with GNMA Securities at 3.65% fixed interest rate for a 25-year fully amortizing loan. Prior to this in March of 2020 GIC and AMS closed a refinance with Community Hospital for an $84,589,800 FHA Insured Mortgage at 2.95% for a total HUD committed debt amount of $169,179,600 and an effective blended rate of 3.27% of fully insured, non-recourse debt. $73,884,500 FHA/GNMA INSURED MORTGAGE LOAN COMMUNITY HOSPITAL NOVEMBER 2021 MICHAEL THOMAS Managing Director 303.810.5170 mthomas@gershman.com SCOTT GRABER Senior Managing Director 206.276.4402 sgraber@gershman.com A s I went to write this article, I couldn’t help but think about how different the world feels in April as com- pared to last October, when I wrote a similar article on the Northern Colorado Class A apart- ment market. There appears to be much more volatility in nearly every commodity and market than there was just six short months ago given inflation and geopoliti- cal concerns with Russia’s invasion of Ukraine. The 10-year U.S. Trea- sury yield has jumped from 1.5% to nearly 2.75%. According to the U.S. Bureau of Labor Statistics, U.S. infla- tion (as measured by the consumer price index) reached a 40-year high in March with the year-over-year data showing an 8.5% increase in the CPI. This can be felt throughout the U.S. economy, whether that’s at the gas pump, the grocery store or a restaurant, or in building materi- als, labor, housing costs, etc. With all this uncertainty in the world, the Class A, institutional size and quality, apartment market in the Northern Colorado region appears to remain extremely strong. The strength of the market is reflected in our biannual survey, which was just completed. Stabi- lized communities in Larimer Coun- ty experienced a year-over-year increase in average asking rents per square foot per month of approxi- mately 13.47%, with that rate climb- ing from $1.66 to $1.89. Occupancy increased slightly during this peri- od, moving from 95.46% to 96.03% year over year. In the northern Weld County area (Greeley, Evans and east Windsor), occupancies also increased slightly, moving up from 94.52% to 95.3% year over year, and average asking rents per square foot per month were up even more dramatically than in Larimer County, increasing from $1.42 to $1.71 year over year, for a growth rate of 20.23%. Concessions remain extremely low (one month’s free rent maximum and only in very select instances) or nonexistent in the market. Delinquencies also remain extremely low. This strength in the market and the in-migration into Northern Colorado from other states, regions and even the Denver metro area has led to significant ongoing demand for quality insti- tutional apartment community development sites, and rightly so, as there are less than 1,000 units with- in Class A, institutional communi- ties currently under construction in the entire region. This as compared to nearly 3,000 units that were under construction and in lease-up in the time period approximately 18 to 42 months ago. The market remains very strong, and demand appears to be steady, if not accelerating. However, there are many headwinds that make it increasingly challenging for apart- ment developers to bring projects out of the ground. The rampant inflation on material costs and labor, as well as the volatility in the financial markets and rap- idly increasing interest rates, are relatively new challenges develop- ers are facing in addition to those familiar and persistent challenges, which continue to include: sourcing quality development sites in munic- ipalities/districts with cost-feasible impact fees and/or favorable raw water situations; continually rising development impact fees and raw water dedication costs in nearly every municipality; longer entitle- ment and construction timelines due to lack of staffing in planning departments; supply chain/material procurement challenges; and lack of construction labor/trades. Some municipalities also have raised their cash-in-lieu of raw water fees and/or other impact fees, which exacerbates the challenges related to delivering new attainable or affordable housing to the market. In some cases, the raised fees hamper delivery of new market-rate units, which also negatively impacts overall affordability of housing in those areas. We are seeing more activity and proposed projects in the region, but with the headwinds noted above, my expectation is that, while many of the proposed proj- ects will come out of the ground at some point, the pipeline likely will be delivered over a number of years, and some projects may be put on hold indefinitely. Assuming demand for new apart- Despite headwinds, keep betting on Northern CO Jake Hallauer, CCIM President, NAI Affinity Please see Hallauer, Page 28

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