Colorado Real Estate Journal - August 2, 2017
An affordable apartment community in one of the hottest locations in Boulder sold to a Southern California firm for $13.6 million. The nearly $200,000 per unit Avanath Capital Management LLC paid for Depot Square is about $173,000 per unit less than what a buyer could expect to pay for market-rate product in Boulder. The 71-unit LEED Gold property, completed in 2015, is located at 3195 Pearl Parkway in Boulder Junction. It sits atop the Regional Transportation District bus depot, across the street from Whole Foods and the new Google campus, and close to the Twenty Ninth Street shopping and entertainment area. Depot Square is permanently affordable to residents earning up to 60 percent of area median income. Pedersen Development Co. developed the community, designed by Short Elliott Hendrickson Inc. “This property’s phenomenal location and high-quality build made it an attractive addition to our national portfolio,” said John Williams, president and chief investment officer of Avanath. “As a newly constructed affordable community within a mixed-use, transit-oriented development, Depot Square presented a compelling investment opportunity to capitalize on the demand for housing near major jobs, transit options, and retail amenities, while also maintaining affordability in one of the most cost-burdened markets in the state.” “The advantages of affordability are tremendous in a market like Boulder because, once you reach stabilization, it’s very rare that you have vacancy,” said ARA Newmark Vice Chairman Shane Ozment. “So, you’re buying a bond in a market that’s extremely tight on housing, and really a Main and Main location. “These deals just don’t come up very often, and if you can find one that is in a location that you like, and especially a brand-new deal, you’re buying a bond forever. If you’re happy with whatever the yield is on that bond, there’s very, very limited downside,” he said. According to ARA Newmark, Boulder has one of the best apartment markets in the country, and the highest four-quarter average price per unit (more than $373,000) and price per square foot ($442) in Colorado. Depot Square was built to satisfy the affordability requirement for the high-end Solana 3100 Pearl apartments across the street, which sold for $426,332 per unit in late 2016. Rents for market-rate apartments in Boulder average $2,100 per month, nearly double the average monthly rent of $1,200 at Depot Square. “Boulder’s explosive job growth, population gains, and strong market fundamentals have fueled year-over-year rental increases, resulting in tremendous demand for affordable housing to support this growing workforce,” Williams commented. “Google is developing a 330,000-square-foot office campus directly across the street from Depot Square and expanding from 340 to 1,500 employees. Based on these factors, this property is well-positioned to command high occupancies and generate attractive risk-adjusted returns to our investors.” The first phase of the Google campus is slated for completion by the end of this year. Other notable high-tech employers in the area include IBM Corp., Ball Aerospace, Lockheed Martin and Oracle. “When people think of tech workers, they tend to focus on the Google engineers and neglect to consider the customer support team and service staff,” said Williams. “Depot Square will cater to the thousands of service sector employees at these major tech companies, and also at nearby restaurants, retail, and hospitality in the area.” Consisting of 38 percent one-bedroom and 62 percent two-bedroom units, Depot Square features large patios and balconies; floor-to-ceiling tinted, custom glass windows; open floor plans; and wood-style plank flooring. Residents enjoy free access to the entire RTD transit system. The apartments are next to a 382-space parking garage, Hyatt hotel and 100,000 sf of newly completed office space at Boulder Commons. Rêve, with 108,700 sf of office and 24,500 sf of retail space, along with 240 high-end apartments, will be developed catty-corner from Depot Square. Depot Square’s on-site amenities include a community center, laundry rooms, storage and garage parking. Avanath Capital plans to implement light capital improvements and improve operational efficiencies to drive value and increase net operating income. With all of the development underway and planned in the vicinity, “There are a lot of jobs there,” but few affordable living options, said Ozment, who represented Pedersen Development in the sale with ARA Newmark’s Terrance Hunt, Jeff Hawks, Doug Andrews, Justin Hunt and Andy Hellman. Avanath Capital Management is an institutional fund manager that has invested more than $1 billion in affordable and workforce housing properties throughout the United States. The company is targeting the Denver and Boulder areas for future investments. Other News Leasing is underway at VerraWest, a high-end, 276-unit apartment community at 1420 Renaissance Drive in southwest Longmont. Developed by Longmont based Actis LLC, the community includes one- to three-bedroom apartments from 662 to 1,320 square feet. Amenities include a swimming pool, spa, sun deck, fitness center and clubhouse with a TV lounge. The 14-acre property also features open, grassy areas; a community garden; mountain views; and access to neighborhood open space, parks and trails. “With VerraWest, we’ve taken design features, service and modern amenities that you’d typically find in urban areas and integrated them into this beautiful setting in a way that supports the southwest Longmont lifestyle,” said Actis CEO Richard Groves.