Tag Archives: multifamily properties

New Apartment Sales and Construction in Colorado Springs

The Colorado Springs apartment market is making a strong comeback, as shown by recent sales and new construction starts.

Major investors from out of the area have recently purchased large multifamily properties in Colorado Springs. In October, Sequoia Property Partners of New York closed on the South Circle Arms, a 112-unit apartment complex built in 1969. Many new upgrades were completed in the last five years, including new 30-year roofs on all the buildings. The $5.4 million purchase price produced a value of just over $48,000 a door.

Another October purchase was of the Rustic Hills Park Apartment, one of the last large distressed properties in Colorado Springs. The 243-unit property went for the bargain price of just over $17,000 per unit, or $4.2 million.

The new owners, Connexion Asset Group of Lakewood, CO, need to address a backlog of deferred maintenance and a low occupancy rate to stabilize the property. They have a successful track record of turning around failed assets, which is why they were selected from the 15 bidders on the offering.

This past summer Advenir, a Florida-based real estate company, bought the 220-unit Briarglen Apartments for $16.3 million, or $74,000 a door. They have announced plans to buy up to 2,000 units in the Denver and Colorado Springs markets. Chief Acquisitions Manager Todd Linden says, ““We think, long-term, Colorado is a great state to invest in. There’s going to be a lot of job growth there.”

At the end of September they purchased the Cheyenne Crossings Apartments for $19.5 million, coming in at over $85,000 per unit for the 220 units.

Seagate Properties of California now has a Denver office and hopes to build their Front Range portfolio to 2-3,000 units. They already own a couple of smaller apartments in downtown Colorado Springs, and in 2010 purchased the 115-unit Fillmore Ridge Apartments for $2.8 million, or just over $24,000 a door.

After years of little or no multifamily development, several new projects are under way, or awaiting final approval.

Grading is already underway at the corner of Woodmen Road and Union Boulevard, where Denver-based Southwestern Investment Advisors and Utah-based Talos Holdings have teamed up to build a 230-unit luxury apartment complex.

Up north in Monument, local group Vision Development has begun a 177-unit complex and at the south end of town, long-time local developers, the Nor’wood Development Group, has broken ground on the 240-unit Mesa Ridge Apartments. This project is close to Fort Carson, which should continue to add troops coming back from tours in Afghanistan, as well as the aviation brigade, expected to arrive with their helicopters and support staff in 2013.

On the east side of town, near Peterson Air Force Base, there is a large mixed-use project in the planning stages that would include 450 apartment units in addition to two military office buildings, restaurants and retail space. It will be near the intersection of two major arterials, Powers Boulevard and Airport Road.

All of this new construction activity has pushed the number of multifamily permits granted this year to 407, the most since 2002, when 1,664 permits were issued. That single year had more permits issued than all the subsequent years combined. In fact, in 2009, exactly zero multifamily permits were pulled.

With 44,000 apartment units now available, this year’s total will add less than 1% to the total. With its low vacancy rate and rising rents, it’s no wonder the Springs is looking so attractive to investors and developers.

DFW vs. Las Vegas for Apartment Investors

In response to an inquiry regarding the prospects of these two markets, I put together the following short clip. In it I pulled data from the Bureau of Labor Statistics as well as subscription services comparing DFW and Las Vegas for job growth over the past decade, and projections of population growth through 2015.

 

Huge Boom in Multifamily Construction Coming in 2010

According to a recent report in the Wall Street Journal, multifamily housing starts will increase significantly in 2010. Green Street Advisors, a real estate research firm, says that REITs (real estate investment trusts) plan to put almost $1 billion into new apartment construction this year, a whopping 10 fold increase over the $100 million invested in 2009.

Construction on a building in Kansas City
Image via Wikipedia

Even though apartment vacancies are at a record high and unemployment remains a serious concern, the prospects for 2011 and 2012 are proving too inviting to pass by. Since construction has lagged for several years, the supply of new housing has greatly diminished. This fact, along with an improving economy are the two main reasons stated for the increased optimism about the next few years.

From 2012 through 2015, “apartment REITs may generate the best property net operating income growth that they’ve seen in a very long time, maybe ever,” said Haendel St. Juste, a REIT analyst with Keefe, Bruyette & Woods Inc.

Landlords also are excited about the potential for increased demand. The 20-to-34 age group, prime renting age, is expected to increase by five million in the next decade, according to Hessam Nadji, managing director of Marcus & Millichap, the nation’s second largest real-estate-investment brokerage firm. In addition, people who moved home or who moved in with roommates during the downturn also might look for their own apartments as the economy improves.

As an added incentive to developers, costs for lumber, concrete and labor have all dropped at least 10% in the last two years. Another sign of optimism came from the Commerce Department, which announced multifamily housing starts rose by over 9% in January of this year. And architects are finally getting calls again after a year of pretty quiet phones.

This all bodes well for the timing of our development in an emerging market on the coast in North Carolina.

What Happened to the Huge Wave of Distressed Apartment Sales?

A year ago, many were predicting that 2009 would be the year when there would be a large rush of apartments coming to market at killer prices. Since that failed to materialize, the question remains: Why?

After all, the financial news was pretty bleak. Banks were closing at a rate of more than two per week. Both rents and occupancy rates fell to record lows. Large numbers of properties were defaulting on their loans. Surely, 2009 would be the best buyers market since the RTC days of the late ’80s.

NEW YORK - DECEMBER 20:  People walk past the ...
Image by Getty Images via Daylife

The main reason for the lack of deals is that lenders decided to extend the loans that were coming due on properties that were cash-flowing. Apartments that were put on the market didn’t attract much attention because they weren’t at the distressed pricing buyers had expected. There are a lot of private funds out there representing hundreds of millions of dollars, but it’s been hard to find a deal worth investing in, and those that were properly priced attracted multiple offers.

Still, many experts think that 2010 will be the leading edge of defaults that banks won’t be able to overlook. The years 2005-2007 were when a lot of 5-year mortgages were placed based on overly-rosy projections. Now those are starting to come due, with a huge number right behind them. According to Real Capital Analytics, at the end of 2009 there were almost $31 billion in distressed multifamily properties, compared to just $10 billion at the end of 2008.

Since only a fool will try to time the exact bottom of a market, a lot of those private funds, as well as larger REITs, are expected to start picking up assets this year. Also, many people who previously had invested in office and retail are entering the multifamily arena now, since many of the assets in that class are at least cash-flowing.

As always, some smaller investors will put together groups to buy distressed properties locally that the larger groups wouldn’t touch. They know the submarkets and have the local knowledge and contacts to realize which apartments are salvagable with an infusion of rehab capital and better management. At least that’s one of the strategies we plan to implement this year.

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