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— Multifamily Properties Quarterly — October 2015
Prudential Mortgage Capital Company combines one of the
industry’s most experienced teams with extensive lending
capabilities and consistent performance in the Colorado market.
We originated $7 billion* in multifamily loans in 2014 and
focused on a variety of specialized property types including:
market rate housing, affordable housing, student housing, senior
housing and health care senior living. Once again, the numbers
prove it: We have the talent and resources to get your deal done.
PRUDENTIAL MORTGAGE CAPITAL COMPANY
WE GET IT.
DONE.
Prudential Mortgage Capital Company’s
loan programs include:
Fannie Mae DUS
TM
loans
Freddie Mac Program Plus
®
Specialized affordable housing programs
FHA
Conduit
Prudential’s life company portfolio and
proprietary balance sheet program
© 2015. Prudential, the Rock symbol, and the Prudential logo are service marks of Prudential Financial, Inc. and its related entities. *As of 12/31/2014.
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I
t was predicted that after the
record sales volume experienced
in 2014, the metro Denver apart-
ment market would not encoun-
ter another year with that mag-
nitude of sales for years to come.
In 2014, apartment sales volume
reached $3.6 billion, which exceeded
the previous annual record set in
2012 by 30 percent. As impressive as
the increase was, it becomes even
more impressive when you consider
that the sales volume for metro Den-
ver from 2008 to 2011 averaged $888
million per year.
Well, the projections for 2015 were
wrong. All indications lead to yet
another year of record-setting vol-
ume. The metro Denver apartment
market is on fire with rent increases
topping the nation and vacancy at
historically low levels. These trends
have attracted extensive national
interest from institutional and pri-
vate buyers, deepening the pool of
investors interested in metro Denver
multifamily properties. With these
market fundamentals, low interest
rates and buyer demand, cap rates
have remained level and, in some
cases, have even lowered.
Another reason for record sales
volume is the increase in price per
unit for Colorado apartments. Dur-
ing 2014, the average price per unit
for communities with 200 or more
units was $169,519, which is 102 per-
cent greater than the average price
per unit in 2010. This increase is due
to three factors.
First, the metro Denver apartment
market averaged over 8 percent rent
increases every year for the last
four years, and rents are still climb-
ing. For the second
quarter of 2015,
rents in Denver
increased 13.6 per-
cent year over year.
Second, the
value-add strategy
is popular with
over 85 percent of
potential buyers
in metro Denver
wanting to pur-
chase, upgrade and
sell buildings to
meet their invest-
ment goals. These newly remodeled
properties continuously achieve
record sale prices for their vintage.
Last, developers are building con-
siderably more expensive apartment
communities. The location – Lower
Downtown, Highland or Cherry
Creek; the type of construction –
high-rise vs. garden style; and the
world-class amenities – zero-entry
pools, bowling alleys, rooftop gar-
dens and concierge services – cost
more, and Denver renters are will-
ing to pay for the lifestyle that these
properties provide. Oddly enough,
through midyear, there have been
very few Class AAA luxury apart-
ments sold. One of the few was 2828
Zuni. This recently constructed,
beautiful property may be one of the
only sales this year over $300,000
per unit.
Despite the lack of new core prop-
erties on the market, year-to-date
sales volume is approaching $3 bil-
lion, which is on pace to exceed
2014 levels and could reach the $4
billion mark. ARA Newmark ended
2014 with over $1.45 billion in total
sales volume, and, with one quarter
still left in 2015, already has reached
$1.36 billion. With the current pipe-
line, ARA Newmark most likely will
exceed $2 billion in Colorado apart-
ment sales this year.
Many are wondering, when does
this all stop? It may not stop for a
while. The acclaimed Denver mul-
tifamily market shows no signs of
slowing. During the next few years
there will be an increase in recently
completed apartment properties.
These new properties will trade at
per-unit levels in the high $300,000s,
and Denver may see its first apart-
ment sale above $500,000 per unit.
The only slowdown in activity
would be caused by increased inter-
est rates, but even that should be
temporary because the Denver mar-
ket is poised to be driven by demand
from the millennial generation for
the next decade.
Notable 2015 Denver transactions
contributing to the record-setting
pace include:
• Horizons at Rock Creek, a 1,206-
unit, resort-style community in
the town of Superior that sold for
approximately $255 million, which is
the largest multihousing transaction
in Colorado history.
• The Denver/Cherry Creek Value-
Add Portfolio that included The
Blake and The Allison, Brittania
Jeff Hawks
Vice chairman,
ARA, A Newmark
Co., Denver
Market Update
Chart courtesy ARA
The average price per unit for communities with 200 or more units in Denver
