Category Archives: Reports

Why I’m Moving from Apartments to Notes

In the last year, opportunities to buy apartments at a reasonable cap rate pretty much disappeared from my Colorado Springs market. This was mostly due to all the cash coming from Denver brought down by investors who had been priced out of the Denver market.

Last fall I bid on a 30-unit over-55 property. It needed new windows but was otherwise clean and full. My bid was rejected and it sat for a couple months. Late in the year it went under contract, but fell back out in March. My broker called to tell me it was back in play and to ready a proof of funds letter. He said only one other investor had been told about it. When I called in the next day, it was already under contract for more than the asking price, all cash.And just last week, a 60-unit apartment in my buying area was bought by an out-ot-state investor for all cash. Tough to compete with that!

I had already been training in notes for several months, and this apartment sale was the final tipping point for me. I decided to go full time into buying, selling and creating notes.

One of the big problems with this field is that hardly anyone, even long-time real estate investors, has any idea what notes are, much less how to leverage them into a great investment. There is fantastic training available from note pros who have been operating under the radar for decades, but it’s my job to in turn educate my investors so they feel comfortable in the note space.

To that end I have created a new company and new website dedicated to telling the note story to investors looking for a strong return backed by cash-flowing real estate. I am now working with a few of these to help them build a portfolio of notes to diversify their investments. I’m putting them into performing notes, ones that have a strong and ongoing record of on-time mortgage payments. You can learn more here: The Riverstone Fund.

Colorado Springs Apartment Sales in 2013

Here is a list of the 32 apartment properties sold in Colorado Springs in 2013. I’ve sorted them by dollars per square foot and have separated out the two outliers that were built in this century.

The remaining sales were mostly of the 60s and 70s vintage and made up most of the transactions in the city last year. Among the older stock, the average price per square foot was $64, with a range from $30K to $124K. The average price per unit was $46K, with a range from $23K to $80K.

If you click on the little arrow at the top right of the chart, it will open into a bigger version that should be easier to see and print. Data are from reliable sources but are not guaranteed.

Colorado Springs Apartment Rents Continue Upward Trend

The Colorado Springs apartment market continues to show strong growth through the third quarter of 2013. Not only has the vacancy rate stayed at its 12-year low of 5.4% (down from 6.1% a year ago), but the average rental rate set a record at $830.34 per month, breaking the previous record of $807.21 set during the previous quarter. That makes 15 quarters in a row that the Colorado Springs apartment rental rate has increased over the previous year.

English: Centennial Plaza Apartments, 516 E Ki...

Centennial Plaza Apartments, 516 E Kiowa St, Colorado Springs, CO (Photo credit: Wikipedia)

The average rent for a one-bedroom apartment is now $730.54, and two-bed, two-bath units are commanding an average of $1005.40. Three bedroom apartments are renting for an average of $1192.17.

In further promising news, although Denver has now returned to its pre-recession rental rates (adjusted for inflation), Colorado Springs still has a way to go. Therefore, there is still room for rental increases just to get  back to what folks were paying here in 2001-2002.

You can read the full report at the Colorado Division of Housing site.

Good News for Colorado Springs Apartment Investors

Stories from three different areas point out the continuing investor interest in Colorado Springs.

2012 was a very good year for apartment sales in Colorado Springs. In fact, the $198 million total was the largest volume of sales since 2007, at the start of the recession.

Apartments are a strong investor magnet nationally, and for several reasons. First of all, the returns operators are getting are high enough to attract institutional investors, such as insurance companies and pension funds, who might otherwise invest in stocks and bonds. They also like the relative stability of well-run assets compared to other commercial real estate categories. In addition, apartments remain one of the easiest commercial types to obtain both equity and debt financing.

Apartment Building

Apartment Building (Photo credit: Wikipedia)

Colorado Springs is now getting on the radar of investors who have shopped in Denver, but found the competition there has driven prices way up recently. In fact, a great majority of apartment sales here have been brokered by Apartment Realty Advisors of Denver, which doesn’t even have an office in the Springs.

Prices paid for apartments here have been rising as well, boosted both by competition and rising rental rates. Most of the recent sales were of 1980s product, and they averaged over $120 per square foot.

Read the complete story here.

In more good news for Colorado Springs, WallSt24/7.com recently compiled a list of the best- and worst-run cities in the country. Of the 100 largest cities studied, Colorado Springs came in 14th, just ahead of Portland and Omaha. Factors that helped our city rank so well include its low crime rate and excellent credit rating. They also noted that our housing values stayed basically flat from 2007-2011, when those in the rest of the country was declining by an average of 10%.

Here’s the complete report.

It’s always flattering to be highly ranked in some national survey, but it may mean even more when someone is willing to bet real money on the future of the city.

For instance, billionaire Ray Kroenke, who owns the Denver Nuggets, the Colorado Avalanche and the St. Louis Rams, in addition to vast real estate holdings, recently purchased two Colorado Springs shopping centers for $31.5 million.

Uintah Gardens is a popular 215,00 square foot center on the west side, anchored by a King Soopers and includes a Walgreens, Petco and Big 5 Sporting Goods among others.

Academy Place is on north Academy at Union Boulevard. The Kroenke group bought all the retail shops between the Safeway and Target anchors.

Another Kroenke enterprise, THF Realty, is planning a 350,000 square foot retail mall on the south side that will be anchored by a Wal-Mart Supercenter and a Sam’s Club store.

Local commercial brokers believe it’s a real vote of confidence for the local economy that an investor of Kroenke’s clout (he’s on the Forbes Top 100 list) has turned his attention to Colorado Springs.

Here’s more on his local activities.

As you can tell from all this good news, many are feeling bullish on the Colorado Springs apartment market. However, with the deep pockets of institutional investors starting to buy up local properties, it’s getting harder for smaller investors to locate a deal that makes sense.

First Quarter 2012 Multifamily Investing News for Colorado Springs

“The local economy showed its strongest growth in two years. The Business Conditions Index stands at 106.91, its highest value since June 2008.” Thus begins the January 2012 version of the Quarterly Updates and Estimates report published by Fred Crowley, Senior Economist at the University of Colorado at Colorado Springs (UCCS).

http://www.usafa.af.mil/cadetFocus/cadetPhotos...

In the report’s section on the multifamily market, we learn that the average rent for an apartment in September was $779, and the vacancy rate was 6.2%. The author expects the market to remain tight through 2012 as troops returning to Fort Carson will outnumber the new apartment units in the construction and planning stages.

The report also states that unemployment dropped for six months in a row compared to the previous year. The rate stood at 9.37% in December 2011.

In other local news, Seagate Properties of San Rafael, California has bought its third apartment complex in the city in the last ten months. The latest acquisition was the 310-unit apartment complex known as Sunset Creek Apartments. Located at 5400 N Nevada, it is across the street from the UCCS campus and next to the University Village shopping center. Part of the Pikes Peak Greenway trail system goes right by the complex. The new owners plan to build a new swimming pool and clubhouse, as well as upgrading the tennis and volleyball courts among other improvements both inside and out.

Seagate now owns five properties in the area totaling 685 units. The others include Copper Chase, Cascade Park Apartments, Boulder Crescent Apartments and the Fillmore Ridge Apartments. They plan to buy a total of 2,000 units in Colorado in 2013.

U.S. News & World Report recently named Colorado Springs as one of the Top 10 “Best Weekend Getaway” destinations in the country. We made the list at the number six spot largely for our “prime picture-taking real estate” as well as for being home to the United States Air Force Academy and the Olympic Training Center. The top three recommended places to visit were the Garden of the Gods, Manitou Springs and the top of Pikes Peak.

In late-breaking news, Frontier Airlines has recently announced they are making Colorado Springs one of its first “focus cities”, a term they use to represent their new focus on local markets. In January, the airline announced new non-stop flights to Phoenix, Los Angeles, Seattle and Portland, starting in May. Part of the strategy is to use larger, newer, more fuel-efficient planes on these new routes.

“They clearly see the potential in this market,” said Dave Csintyan, interim CEO of the Greater Colorado Springs Chamber of Commerce and Economic Development Corp. “I think they see this as an underserved market.”

As the economy continues to improve and more troops and visitors return to Colorado Springs, it’s looking more and more positive for investors in the region.

Related Stories:

 http://csbj.com/2012/03/08/seagate-purchases-third-complex-in-10-months/

http://coloradospringsapartmentinvestor.com/new-apartment-sales-and-construction-in-colorado-springs