Colorado Real Estate Journal - April 16, 2014
Security Properties Inc. recently paid $23.5 million for the 220-unit Reserve at Northglenn Apartments. It was the second time that Seattle-based Security tried to buy the Class A property at 1450 Community Center Drive and the second apartment community it owns in the area. Previously, it purchased the nearby Reserve at Thornton. Both properties were purchased from Trammell Crow Residential. “Because we had purchased the Reserve at Thornton, we knew the seller and were pretty familiar with the area,” said Corey Baldwin, an associate investment manager at Security Properties, which has acquired or developed more than 66,500 residential units at a cost of more than $3.35 billion during the past four decades. “When we first learned of the listing for the Reserve at Northglenn, we chased it pretty hard,” he said. Instead, another company was the winner, but that deal did not close. Trammell Crow Residential “came back to us and we got it done,” Baldwin said. The property is composed of affordable apartments for renters earning less than 60 percent of the area median income. It marks the fourth acquisition of that type in the Denver area in the past 14 months by Security Properties. With the latest purchase, Security Properties owns about 1,500 units in the Denver area. “Denver is one of our main strategic growth markets given the strong market fundamentals and quality lifestyle experiences for our residents,” said Bryon Gongaware, managing director of the firm’s Affordable Housing Group. Security Properties teamed with Enterprise Community Investment Inc. and Adams County Housing Authority to acquire the property from SunAmerica and Trammell Crow Residential. “We are excited about the key partnerships we structured with Enterprise and Adams County Housing Authority for the preservation of this quality affordable housing community,” Gongaware said. Built in 2001 the community provides residents with convenient access to downtown Denver, retail and employment centers, and recreational options, according to the company. The property is a mix of one-, two- and three-bedroom units and includes washer and dryer hookups in each unit, an outdoor pool, fitness center and garages. Security Properties will invest additional capital for improvements to both the interior and exterior of the property. Overall, the community is in very good shape, so it doesn’t need a huge renovation, Baldwin said. “We expect we are going to invest several hundreds of thousands of dollars in it,” he said. “I think it would be safe to say we are going to invest around $500,000 on improvements,” Baldwin said. Along with the improvements, additional units will be set aside for residents earning 30 percent to 50 percent of area median income. The sellers were represented by Tim Flint of the Tax Credit Group of Marcus & Millichap, and Fannie Mae financing was provided by Tim Leonhard of Oak Grove Capital. Security Properties was not represented by a broker in the transaction, Baldwin said. The occupancy rate was in the “high 90s” when the deal closed, Baldwin said. “It has always been very well occupied,” he said. Given how much rental rates have been rising in the Denver area, there likely will be continued demand for affordable housing for qualified renters, he said. “I think so,” Baldwin said. “Given the spread between the maximum tax credit rent and what the market is getting, you see a pretty big spread.” In fact, he said he was told Trammell Crow Residential put together a waiting list of prospective renters. “We are talking to them about getting that list,” he said. Security Properties purchased the Reserve at Northglenn for $106,818 per unit, which Baldwin said is well below the replacement value. “I think we got it at a very good cost basis,” he said. He said given the way the tax credits are structured, the hold period probably will be at least seven years.