Colorado Real Estate Journal - May 3, 2017
An Atlanta-based full-service multifamily investment and management firm is ramping up its Denver presence and bringing its unique value-add approach to the market. Cortland Partners, which entered the Denver market last year with the acquisition of The Covington on Cherry Creek, recently purchased the Metropolitan at Lincoln Station community. The firm paid $99.1 million, according to public records, for the 431-unit community at 10185 Park Meadows Drive in Lone Tree. AEW Capital Management sold the one-, two- and three-bedroom property, constructed in 2005, in a deal handled by Moran & Co.’s Dave Martin and Pam Koster. “Our bread and butter is the suburbs and Lone Tree is an amazing suburb of Denver,” said Adam Hazlett, local director of investments for Cortland Partners. “We’re excited to be able to get an asset of that quality, in that location right on light rail at below market price and be able to execute Cortland’s value-add program. It’s perfect for us. “Denver is perfect for what Cortland wants to do,” Hazlett continued. “It has a fantastic job story, wage growth story, population growth story and single-family housing is great. It’s a lifestyle that appreciates Cortland’s highly amenitized, highly finished homes.” The firm’s desire is to create units that residents see more as a home and less like an apartment. To meet this goal, Cortland Partners spends an average of $25,000 (community dependent) per unit versus the $7,000 to $8,000 per unit of competitors on upgrades. The improvements are designed to bring Class B suburban product to as nice as Class A communities. “It’s a very heavy value add,” added Hazlett. Renovations include new cabinets, granite countertops, under cabinet lighting, new lighting fixtures, new, high-end flooring, new, stainless steel appliances and new bathrooms. Additionally, “We spend a significant amount of intentional design effort accommodating amenities.” Often, explained Hazlett, the clubhouse in suburban product is underutilized. Cortland Partners endeavors to make it more utilized by adding value. At its Colorado properties, Cortland plans to make fitness centers larger, add spin classes, yoga, and fitness on demand, for example. The firm also will create space around the pool that encourages gathering with soft seating, televisions and fire pits, for example. “We want residents out of the apartment and engaging in the community, to see it more like a home,” said Hazlett. Cortland Partners is halfway through its unit renovations at The Covington at Cherry Creek and is just getting underway on unit renovations at its Grand River Canyon community in Colorado Springs. While Cortland Partners typically acquires suburban product of 300 units or higher built from 1995 to 2010, its capital relationships have asked the firm to expand geographically and within the risk spectrum of investments so the firm is looking to add coreplus investments to its portfolio and is looking at most western markets, excluding California. The firm is bullish on the Denver market and sees itself as maintaining a large, long-term presence in Colorado. Cortland Partners is a full-service multifamily real estate acquisition, development and operating entity focused on providing superior living spaces and experiences to its residents and producing high-quality net operating income performance that generates outsized, risk-adjusted returns for its investors. Cortland Partners owns almost 40,000 apartment homes in 17 markets throughout eight states, primarily in the southeast and Texas. Other News ¦Denver’s apartment market gave mixed signals during the first quarter as metrowide vacancy moved up substantially while rents also increased, according to Apartment Insights’ Statistics/Trends summary. Denver metro’s vacancy rate, which has trended upward for 10 quarters, broke the 6 percent level, ending the quarter at 6.03 percent – up 45 basis points from fourth quarter 5.56 percent. The current rate also is 89 bps above the rate a year ago and is now at the highest level in seven years. The overall vacancy rate, including properties in lease up, moved up 103 bps during the quarter to 9.7 percent – also the highest level in seven years. Absorption slowed, dropping to its lowest annual pace in three years, at just above 5,000 units. During the quarter, a positive 505 units were absorbed in conventionally operated properties. The figure is better than last quarter’s 339 units, however, it was the second-lowest rate since late 2013, according to the report. Within the central business district, despite stabilized vacancy rising to more than 8 percent, absorption was a “strong” 253 units – the highest level since fourth-quarter 2015 and almost double the next closest submarket. Even so, the report noted, absorption could not keep up with the large amount of new supply being added. The summary noted that despite the increase in vacancy and slower winter leasing season, metrowide average rent increased by $14.01 during the quarter to $1,353, with rental growth increasing 4.8 percent over the past 12 months. Rents increased across all major age groups as well, with the smallest increase of $1 experienced in 1970s product and the largest at $25 in 1990s product. Additionally, nine sales closed during the quarter with an average price of $199,830 per unit and $241.10 per square foot. The volume is well below the fourth quarter figure of 26 transactions but sales price per unit and per sf were just slightly below last quarter’s numbers. One City Block achieved the high-water mark of $329,470 per unit and $480.37 per sf. “Even with signs the rental market is softening, developers continue to push the construction pipeline to higher levels,” the report noted. “Approximately half of the 50,000-unit pipeline is under construction with the other half in proposed properties. Although the nation’s largest banks have significantly reduced their construction lending, midsized banks are taking up the slack, often participating with other midsized banks. So far, tightening by the largest construction lenders has not choked off the pipeline of new product.” The Denver pipeline of new product increased to 119 communities with just over 27,000 units under construction. The proposed pipeline shrunk to a similar 119 properties with 24,000 units in various planning stages. ¦A Lower Highlands apartment property recently traded hands for $282,353 per unit. An unidentified buyer paid $4.8 million and $548 per sf for the 17-unit property at 2727 W. 33rd Ave. in Denver. Built in 2015, the LoHi community features units with high ceilings, granite countertops and maple wood flooring. “The sellers were reluctant to part with this incredible building,” said Joe Hornstein of Pinnacle Real Estate Advisors LLC. “But the buyers made an offer they couldn’t refuse. This is probably the nicest apartment building in the entire Highland neighborhood less than 50 units. The buyers intend to hold the property long term and have definitely found an irreplaceable asset.” Hornstein and Pinnacle’s Hornstein|Fetter Apartment Group represented both sides in the transaction. ¦A 26-unit apartment building at 1995 Del Mar Parkway in Aurora sold for $2.71 million. The building, constructed in 1961, traded for $104,135 per unit and $160.45 per sf. Josh Newell and Barton Thompson of the Newell Team at Pinnacle Real Estate Advisors represented both the local seller and buyer in the transaction.