Colorado Real Estate Journal - April 4, 2018
A pair of New York-based firms bought the One Dartmouth Place apartments in a $65.5 million value-add deal. Besyata Investment Group and The Scharf Group acquired the 418-unit community at 11100 E. Dartmouth Ave. in Denver. The community, which comprises one-, two- and two-bedroom-plus-a-den units, will undergo renovations to both its exterior and interior, according to the buyers. The buyers will capitalize on the exterior capital improvement program implemented by previous ownership and plan to add value through gradual unit renovations in addition to amenity/ common area enhancements to better compete with properties in the area. Located five minutes from the Denver Tech Center, One Dartmouth Place features a location that not only is near retail, recreation and employment but also is within a half-mile of the Nine Mile Station light-rail stop and Interstate 225. One Dartmouth Place also includes a 24-hour fitness center, courtyard with barbecue grill, event center, laundry facilities, off-street parking, package receiving, a park like setting, a pet park, swimming pool, playground and television lounge. Apartments at the community, constructed in 1977, feature balconies or gated patios, open floor plans, walk-in closets and additional storage. BH Management, Besyata’s longstanding partner and property manager of 70,000-plus apartments across 23 states, will handle the day-to-day property management and leasing. Besyata focuses on the acquisition and development of multifamily and commercial properties nationwide while pursuing a value-add strategy. It currently owns and operates a multifamily portfolio spanning nine states comprising more than 5,000 units. The Scharf Group is an owner, developer and operator of a large portfolio of commercial, multifamily, health care and senior housing properties nationwide. One Dartmouth Place was last purchased by RedHill Realty Investors LP for $30.5 million in 2014, according to public records. Other News The Alpenhaus, a 92-unit apartment building in Denver, traded hands for $12.5 million, or $135,869 per unit. Shmaryahu Baumgarten, according to public records, purchased the property at 4470 E. Jewell Ave. from Thomas Nguyen. Jules Hochman and Justin Brockman of Pinnacle Real Estate Advisors LLC represented the seller in the transaction. Jamie Mitchell and Michael Krebsbach, also of Pinnacle, represented the buyer in the transaction. “The buyer plans on vacating the entire complex with plans to extensively renovate the interior and exterior of the property over the coming months. They hope to have the entire complex renovated and re-leased within a year or so,” stated Krebsbach. “This will dramatically help re-gentrify this neighborhood and provide excellent housing opportunities at the corner of Evans and I-25.” For the first time in 30 years, the Abrigo Apartments in Aurora sold. The 66-unit apartment property at 12170 E. 30th Ave. sold for $7.3 million. Phil Dankner and Kevin Higgins of the Greystone Unique Apartment Group, part of Unique Properties, represented both the unnamed buyer and seller of the asset, constructed in 1969. The community comprises 11 studio units that average 450 square feet, 43 one-bedroom, one-bath units that average 540 sf and 12 two-bedroom, one-bath units that average 750 sf. Forty of the units feature fireplaces, electric kitchen appliances, dishwashers, ceiling fans, tile flooring in kitchens and contemporary bathrooms. The community includes a leasing office, patio/community area, on-site laundry, vending machines and an inoperable swimming pool. Additionally, it is located at the intersection of Peoria Street and East 30th Avenue. The walkup-style community received multiple offers and sold for list price. It was 95 percent occupied at the time of sale. The new ownership intends to capitalize on the value-add opportunity presented by the Abrigo Apartments, added Greystar. The Applewoods, a 42-unit Lakewood apartment community, recently sold at a 5.6 percent cap rate. An unnamed buyer paid $7.01 million, or $166,786 per unit, for the community at 1975 Oak St. “The Applewoods experienced a highly competitive bid process. Buyers were drawn to both the quiet location and the fact that the community is well positioned to take advantage of continued market rent growth in west Denver,” said Spencer Bradley of ARA Newmark, who represented the seller in the transaction. “The 1973-vintage property is well-maintained and in relatively original condition. The Applewoods sold above list price and achieved a high price per unit for its vintage.” A 17-unit apartment building steps from City Park sold for $3.28 million, or $192,657 per unit. The vintage property at 1675 Gilpin St., built in 1928, features remodeled and updated units, eight off-street parking spots, and newer windows, roof, boiler, gutters and sprinkler system. Robert Lawson of Pinnacle Real Estate Advisors LLC represented the buyer in the transaction. The Kara Lynn apartments, a 13-unit Denver apartment property, recently sold for $2.1 million. An unnamed buyer purchased the community located at 1974 S. University Blvd. in Denver, directly across from the University of Denver. The turnkey community features four studios, and six one-bedroom and three two-bedroom apartments. Ten of the units were recently renovated and, in 2017, the roof and windows were replaced. “The sale of this property supports the strength of the Denver multifamily market and reassures a strong buyer appetite to acquire rental properties,” said Stephen Scrivener of Marcus & Millichap’s Denver office, who listed the property on behalf of the seller, a private investor. “After 15 property tours, 11 offers had been placed and the sale price reached 99 percent of the listing price.” The apartment property was built in the 1960s. Demand for multifamily units remains healthy, but supply is what to watch in 2018, according to CBRE’s 2018 Denver Market Outlook report focusing on the metro area’s multifamily market. Denver saw a 51 percent increase in absorption last year and this year should see a similar level of demand. However, supply is the main indicator to watch this year, the report noted, as construction delays last year have pushed 2018 to be the cycle peak for deliveries. Additionally, according to the report, population and job growth will continue decelerating – adding to a growing imbalance between supply and demand. As such, fundamentals will soften as supply gives rise to vacancy rates and tempers rent growth. Certain submarkets with elevated supply, like downtown, will moderate further than others while suburban multifamily is showing signs of strength as some tenants prefer the high quality but less expensive suburban product – particularly with light-rail access. CBRE reported that Denver’s multifamily market will continue to be dictated by geography. According to Apartment Insights, the report noted, downtown Denver had the strongest net absorption among submarkets in 2017 (1,795 units), but also saw the most units deliver (2,095). In the short term, downtown fundamentals may lag the overall market as landlords attempt to attract tenants with lower lease rates and more concessions. On average, suburban submarkets will outperform central Denver in 2018, achieving stronger rent growth and a vacancy rate that is about 200 basis points lower. According to Real Capital Analytics, multifamily sales volume totaled $6.4 billion in 2017 – down slightly from the record-breaking $6.5 billion recorded in 2016, but still well above the cycle average of $3.4 billion, according to the report. Sales of multifamily product accounted for 63 percent of all commercial real estate sales volume in the Denver market during 2017. Average pricing reached $221,623 per unit, a 7.3 percent rise over 2017. Some of this pricing is driven by the trends in high-end development, but rising construction and land costs, as well as the overall appetite for multifamily assets, have boosted pricing as well. The report noted that suburban assets will see further compression in cap rates as Class A suburban assets dipped below 5 percent for the first time in 2017. The popularity of investing in suburban assets will continue into 2018, but the overall outlook for the multifamily investment market is healthy, CBRE added. In 2017, Inland Real Estate Acquisitions LLC negotiated and closed on the purchase of eight multifamily properties in the state on behalf of Inland-related parties. The acquisitions total 2,199 units for a total cumulative purchase price of approximately $509 million. To date, Inland Real Estate Acquisitions LLC has completed the acquisition of 22 multifamily properties in Colorado, totaling 5,183 units. The properties, which include apartment and townhome-style communities, span across the state and are located in Aurora, Arvada, Brighton, Broomfield, Castle Rock, Colorado Springs, Denver, Fort Collins, Lakewood, Loveland and Westminster. “We have continued to see strong economic drivers and demographics throughout Colorado, signaling a need for multifamily properties and a want for renters,” said Matthew Tice of Inland Real Estate Acquisitions. “When looking for individual assets, we are open to multiple classes of products, but strive to acquire high-quality properties in prime locations that serve as employment hubs, retail trade areas or are easily accessed by public transportation,” added Mark Cosenza, also of Inland Real Estate Acquisitions. The pair are responsible for completing the purchases on behalf of the various Inland affiliates.