Colorado Real Estate Journal - April 1, 2015
A San Diego-based company recently purchased a prime value-add apartment community in Westminster. ColRich Multifamily bought the 357-unit Sandpiper Mountain community at 8200 Sheridan Blvd. The sales price was not released, but records indicate ColRich paid $31 million for the community, which was built in 1973. The seller, Bridge Investment Group Partners based in Murray, Utah, paid $16.9 million in 2008, according to public records. In other words, ColRich paid 57.4 percent more for the property than the seller. JLL Managing Director Pat Stucker and Ray White, JLL vice president, represented Bridge Investment. “Denver’s (metropolitan statistical area) is experiencing strong rent growth and the opportunity to acquire a value-add play drew interest from many investors,” Stucker said. “Plenty of jobs are coming to the area, which will further drive the property’s performance,” he said. Sandpiper has 30 three-story buildings. Amenities include three swimming pools, a volleyball court, game room, dog park and small fitness center. “This is a really interesting story,” White said. “ColRich is going to do a significant renovation, and I mean significant, to Sandpiper,” White said. “I believe they are going to build a new clubhouse and upgrade the interiors and the exteriors,” he said. Currently, he said, three units are being used for the leasing office and a small fitness center. Those units will be incorporated back into the leasing pool, he said. The vacancy rate has been hovering around 95 percent to 96 percent, “like the rest of the market,” White said. And like just about every apartment community that hits the market, there was a lot of interest from prospective buyers, he said. “I think we ended up in the range of 12 to 15 offers,” White said. Prospective buyers, he said, liked that Sandpiper is not far from the former Westminster Mall redevelopment as well as FasTracks improvements in the area. The property was built in 2001. It is old enough to need upgrades, but not like a 1970s product that is completely outdated, he said. “There is very high demand for these value-add deals,” White said. “We are working with buyers on several right now,” he said. The key is that the return on the improvements is far greater than from the actual purchase, he said. “I can’t quote you an exact number on this deal. But in general, if you spend, let's say, $5,000 on a rehab per unit and you get another $100 or $150 per month because of the renovation, that is a far bigger return than on your investment as far as what you paid per door,” White said. At the same time, given the record rental rates, especially for newer properties, the rehabbed units still will be far below newer, nearby communities, he said. “The willingness of renters to pay the rent is what drives this,” White said. “Obviously, if the renters were not willing to pay the higher rent, this strategy wouldn't work,” White said. And with demand for apartments expected to continue, both in the short and long term, he sees no backing off of this strategy. “The appeal is that even with the higher rents after the rehab, it is still going to be cheaper than the brand-new building next door.”