Colorado Real Estate Journal - December 16, 2015
It wasn’t a huge apartment deal in terms of the sales price. But the recent sale of the 58-unit Village West in Arvada was significant for two reasons. First, it illustrated the attractiveness of value-add deals for investors. It also is an example of how Arvada is increasingly on the radar screen of investors. A company headquartered in San Francisco and Chicago, 29th Street Management LLC, paid $7.95 million, or $137,069 per unit, for Village West. The sales price represented a record for a non-renovated apartment community built in the 1970's in Arvada. “This was an interesting deal,” said Andy Hellman, who handled the deal with fellow ARA Newmark broker Justin Hunt. “It was part of a portfolio Justin and I are selling for an investor out of Los Angeles,” Hellman said. The buyer was debating whether it would be better to sell the apartment communities as one portfolio or separately. Hellman and Hunt advised the seller to list them separately, as they were geographically dispersed. For example, they sold one apartment community in Dillon, in Summit County, for $10 million. “We did have offers to take down the whole portfolio, but we thought it made more sense to sell them separately,” Hellman said. The various communities have a total 620 units. “They are mainly C Class properties aimed at blue-collar renters,” Hellman said. “But locationwise, they were kind of scattered; they were all over the map,” he said. Village West was a bit unusual in that Hellman and Hunt didn’t market it. “We had a buyer who was willing to pay a good price,” Hellman said. “We gave them a number and they took it before we took it to market,” Hellman said. “This was really a perfect storm,” for the seller, he said. “With virtually all of the new construction being for Class A, high-end properties, a lot of blue-collar workers and lower-paid workers simply can’t afford to live there,” Hellman said. “So there is high demand from renters and high demand from investors for this type of product aimed at the working class,” Hellman said. "The buyer plans to do a full facelift that will position the property to take advantage of the strong rent growth and demand in Arvada,” Hellman said. Arvada’s location near downtown Denver on the west side of the metro area also is a big selling point for investors, he said. Village West is less than two miles from Interstate 70 and is 1½ miles from the future Ward light-rail station on the Gold Line, an 11.2-mile electric, commuter rail transit line that will connect Denver’s Union Station to northwest Denver, Adams County and Arvada. With final designs underway, construction has begun with an expected completion date of 2016. The Gold Line will include eight stations. "This was a great deal for both the buyer and seller,” Hellman said. “The seller was able to take advantage of the favorable market conditions while the buyer was able to secure a property that has significant value-add potential,” Hellman continued. “The buyer plans to spend significant money to improve the exterior of the community as well as the unit interiors," he said. Other News Gibraltar Property Management paid $47 million to Kinnickinnic Realty Co.for the 402-unit Terra Village at 6291 W. 26th Ave. in Edgewater. David Potarf, Dan Woodward and Matt Burnettof CBRE handled the transaction. Fowler Property Acquisitions paid $28.75 million to Kinnickinnic Realty Co.for the 213-unit Ten 49 (Highlander) apartment community at 1049 E. Ninth Ave. in Broomfield. David Potarf, Dan Woodward and Matt Burnett of CBRE handled the transaction. Griffis/Blessing paid $16.25 million to Kinnickinnic Realty Co. for the 138-unit Colonnade apartment community at 15597 E. Ford Circle in Aurora. David Potarf, Dan Woodward and Matt Burnett of CBRE handled the transaction. ARA Newmark brokers Justin Hunt and Andy Hellman traveled farther than usual on two recent apartment communities they sold. That is because it is 525 miles to fly from Denver to Bozeman, Montana, where they sold two properties. But they didn’t mind. “Bozeman is really a neat town with a great vibe,” Hellman said. Although much smaller than Denver, Bozeman, he said, reminds him a bit of Denver’s Union Station neighborhood, crossed with the charm of downtown Breckenridge or Durango. “Bozeman has really great restaurants and great bars,” Hellman said. “And skiing is out your back door at Bridger Bowl and Big Sky,” he said. “And with Montana State being right there, it is filled with young people,” he said. The biggest community they listed was the 161-unit Mountain View. Mountain View was built in 1996 and the average unit size is 995 square feet. Although a nondisclosure agreement prevents him from releasing the sales price, Mountain View was listed at $22.5 million. “We ended up with 15 offers on it,” Hellman said. Prospective buyers were from Colorado, Utah, California, North Carolina and Texas. The Utah-based seller had tried to put some United States Department of Housing and Urban Development debt on the property, but was unable to do so. During that process, it received an unsolicited offer for it. “They called us for some advice and we came with a bigger value for it, even though apartments are kind of hard to value in Bozeman,” because the market is so small and so few communities trade hands, Hellman said. “It’s hard to figure out what the cap rate should be when hardly anything ever sells,” and there is no good database of transactions like you would find in Denver.” It is, however, an extremely tight market. “Basically, there is a fractional vacancy rate,” Hellman said. The other sale was for the 33-unit Blackmore Apartments. It was listed at $4.1 million. “It’s the oldest apartment building in Bozeman,” having been built in 1913, Hellman said. “It was designed by a very famous architect, Fred Wilson,” he said. The building is on the National Register of Historic Places. “Being a 100-year-old building, it needs some tender loving care,” Hellman said. They ended up receiving four offers for Blackmore. “The buyer is a private individual out of North Carolina,” he said. Hellman said he would love to do more deals in Bozeman. Hellman said Bozeman’s apartment market reminds him of where Denver’s apartment market was in 2012. “I think the Bozeman market has a lot of legs and a lot of running to do,” Hellman said.