Colorado Real Estate Journal - November 16, 2016
Records show that Chicago based AMLI in 2000 paid $51.25 million for a 414-unit apartment community in Lowry. At that time, the community at 8155 E. Fairmount Drive was barely a year old and one of the new breed of rental communities that provided units with high-end finishes and resort-like amenities. Now, records show that AMLI recently sold its Lowry Estates for $112.25 million, more than doubling its money. The buyer was another Chicago company, Mesirow Financial. Mesirow paid $271,135.26 per unit for the AMLI at Lowry Estates. AMLI paid $123,671 per unit. Adjusted for inflation, in today’s dollars AMLI paid the equivalent of $173,389 per unit. And instead of being considered a modern example of rental living, given its age and how far the apartment development bar has been raised, it was considered a value-add deal. “The seller had fully renovated the clubhouse and had upgraded about 25 percent of the units,” said Josh Robbins, who listed and marketed AMLI at Lowry with fellow HFF broker Jeff Haag. “Most of the people who looked at it were considering light to moderate improvements on the remaining units,” Robbins said. And there was tremendous interest from prospective buyers, he said. “It was a very competitive deal,” Robbins said. “We had a lot of buyer interest in it,” Robbins said. “AMLI had done a fantastic job through its ownership,” he said. The buyer of the community, which sits on an 18.7-acre site, was MFREV II Lowry LLC, an entity created by Mesirow Financial Real Estate Value Fund II LP. Mesirow Financial has $64.2 billion under management, including $1.8 billion in direct ownership of institutional real estate. Mesirow financed the purchased with a $73.13 million loan from AXA Equitable Life Insurance Co., according to records. Mesirow beat out a lot of other interested parties for AMLI at Lowry Estates. “We toured it more than 20 times,” Robbins said. “These types of value-add deals are very sought after,” he said. “We had buyers from California, New York, Texas, local guys and, of course, Chicago,” Robbins said. Mesirow has owned and sold other communities in the Denver area. In addition to the AMLI at Lowry Estates, its only other current holding is the 241-unit City Gate, which it purchased in 2014 for $52 million. “We had a few offers from new buyers who have not yet bought in this market,” Robbins said. Prospective buyers included high-net-worth individuals, asset managers like Mesirow, some funds and, “for a lack of better word, syndicators. They ran the gamut,” Robbins said. AMLI at Lowry Estates also benefited from being in Lowry. “Everyone knows Lowry,” Robbins said. “It is just a great center. Residents here can walk to the Lowry Town Center and take advantage of all of the amenities offered at Lowry,” Robbins said. Indeed, the Breakers Resort near Lowry recently sold for a record-breaking $350 million. “Everyone loves Lowry,” Robbins said. “It is a great, mixed-use community and it is close to downtown, the Denver Tech Center and Fitzsimons.” And prospective buyers continue to love Denver as a place to put their money, he said. “Denver is still high on people’s lists,” Robbins said. “As this sale shows, we are still seeing a lot of very highly qualified groups looking to buy in Denver,” he said. Even if the Federal Reserve increases its federal funds rate in December, as is widely expected, investor appetite for apartment communities in Denver will continue, he said. “There are a lot of buyers out there that rate increases aren’t a big deal, because their financing isn’t tied to 10-year notes,” Robbins said. “Also, rates are so low that a slight increase won’t make that much difference,” he added. “Now, if interest rates were to rise several points, there would be an impact. But we are not going to see that kind of increase in December.” Other News Granite Capital Group, a Santa Barbara, California-based real estate investment firm, recently paid $10.6 million for the 48-unit Kipling Commons apartment community in Arvada. The sales price equates to $220,833 per unit. Granite expects investors it represents will immediately receive more than 10 percent return on the purchase of the community at 10125 W. 72nd Ave. Granite purchased the property through its GCG Kipling Commons LP investment fund. Kipling Commons has six, two-story suburban apartment buildings, each housing eight units. The two-bedroom, two-bath apartments come with one-car detached garages, Class A finishes, such as quartz counters, stainless steel appliances, plank luxury vinyl tile hardwood flooring and an in-unit washer and dryer. They range in size from 903 to 1,120 square feet. “New construction such as Kipling Commons is attractive to investors because no rehab is required. This lowers investor risk,” said Bruce Savett, GCG founder and principal. “Maintenance costs associated with new high-end construction are more predictable,” he added. Kipling Commons is designed to appeal to young professionals and families who are priced out of the housing market or choose to rent instead of own and are seeking an alternative to more urban settings. “Demand for housing in Arvada is high,” Savett said. “The vacancy rate is under 3 percent. Introducing new housing into the market helps fill a need while making it a smart venture for investors.” Earlier this year, GCG closed initial funding and began developing Fairways at Vista Ridge, a $41.5 million, 14.5-acre, 169-unit single-family rental community in Erie’s Vista Ridge master-planned community. Occupancy is expected to start in spring 2017. It is anticipated upon stabilization, the project will return to investors a mid-teen cash-on-cash return. “There is little new single-family residential construction in the Denver market,” Savett said. “This will likely continue. Although a strong jobs market is keeping demand high, construction is getting cost-prohibitive. However, the region remains one of the nation’s economic bright spots so GCG will continue to seek new residential investment opportunities.” An unidentified buyer paid $1.84 million, or $306,250 per unit, for a six-unit apartment building at 1721 Marion St. in Denver. The property was built and 2001 and is occupied by the Brent Eley Foundation as a Brent's Place. Jim Knowlton represented the seller and Scott Fetter represented the buyer in the transaction. Both Knowlton and Fetter are brokers with Pinnacle Real Estate Advisors LLC. An unidentified buyer paid $1.55 million, or $129,167 per unit, for a 12-unit apartment building at 9990-10000 W. 59th Ave. in Arvada. The building is east of Kipling and West 59th Place in the Ralston Valley neighborhood. Joe Hornstein and Scott Fetter, of the Hornstein|Fetter Apartment Group at Pinnacle Real Estate Advisors, represented both the seller and the buyer in this transaction. “The sellers were motivated to move this asset to provide capital for other buildings they own which they would like to improve,” Fetter said. “The buyer used the purchase to complete a 1031 exchange,” Fetter continued. “In doing so, they were able to buy a property in better condition and in a better location than the asset they relinquished. Their cash flow will also increase so they are happy to close the deal.”