Colorado Real Estate Journal - February 4, 2015
The Laramar Group, a Chicago-based firm that is bullish on Denver and has been on a buying spree of central Denver apartment buildings, has made another record-setting acquisition in the Denver market. In its first record-breaking deal, last year it paid $7.15 million for the Alta Vera building near Cheesman Park. The sale of the building, initially developed as “for sale” condos, was $357,500 per unit, besting the previous record of $332,456 per unit, which equated to $357,500 per unit for the Verve apartment tower in downtown Denver. Last month, Laramar paid $5.45 million, which equates to $160,294 per unit, for the 34-unit Sierra Park Apartments at 23 and 33 Pearl St. in D e n v e r ’ s West Washington Park n e i g h b o r hood. It was the most ever paid per unit for an outside “walkup” apartment building in Denver, said Greg Johnson. Johnson and Kyle Malnati of Madison Commercial Properties represented the seller, a limited liability company headed by Norris Scott. Scott lives in Summit County, but has bought and renovated a number of apartments in central Denver. “This crushed the previous high-water mark of $140,400 per unit set in September 2013,” Johnson said. Actually, Johnson and Malnati sold another walk-up apartment building in early 2015 for more than $150,000 per unit, so that record was going by the wayside, even without the Laramar purchase. Walk-up units were a shortlived, but popular, construction style from the mid- to late 1960s, Johnson said. Walk-up apartments aren’t served by elevators. Individual units open to the exterior and they don’t have long hallways. “Some people disparagingly refer to them as Motel 6 apartments,” Johnson said. He said more than 100 of them were built in central Denver from about 1964 to 1969. “They were the most modern buildings of their time,” Johnson said. Developers liked them because they could build 17 units on a typical Denver double lot, compared with building 12 apartments with long hallways, he said. “I always liked them,” Johnson said. “When I was at Cornerstone, we had a lot of walk-up units that we managed in our portfolio. They have very efficient layouts and they always had the lowest maintenance costs,” he said. He believes renters like them, too. “You can open your door and be outside, which is great in a place like Denver, where we have so many nice days and you want to let fresh air in,” he said. “In most apartments, you open the door and you are looking at a long hallway,” he said. However, the higher density means that they have more, but smaller, units in buildings. Most walk-up units are onebedrooms and most of them are 500 square feet or smaller, he said. “Since they are smaller units, you get less in rent per unit, which means they sell for less per unit,” he said. During the downturn, he said he and Malnati sold many of these walk-up style buildings for $60,000 or $70,000 per unit. However, that doesn’t mean the price has doubled and they have appreciated the most of any product type since the Great Recession ended. “I don’t have any data to back that up,” Johnson said. “Plus, it’s not really making same-store comparisons,” he said. That is because the walk-up buildings they sold during the carnage of the real estate crisis were being sold without having been renovated, while all of the buildings, including Sierra Park, have been upgraded. “Really, we were selling buildings in 2009, 2010 and even 2011 that hadn’t been renovated for 50 years,” Johnson said. “The seller, Pearl Street Denver Partners LLC, did a complete renovation of the property in 2013. They selected all the right finishes, and were able to achieve excellent rent amounts,” he said.