MARKET SNAPSHOT: Value-Add Opportunities Abound in Denver

Denver—Advenir recently entered the greater Denver marketplace with its acquisition of the 220-unit Briarglen Apartments in Colorado Springs for $16.35 million.

“What we like about the Front Range of the greater Denver area is the in-migration, the creation of new jobs, the barriers to entry of new housing and the price point that we acquired this property at as compared to new construction,” explains Steve Vecchitto, principal at Advenir. “We are going to continue to focus in the greater Denver area,” he tells MHN, adding that the company’s goal is to acquire several thousand units throughout he marketplace.

“The greatest appeal of the market is you have quality of life [and the] cost of living is pretty affordable in most areas; you have an affluent renter base, and you have anticipated job growth,” adds Todd Linden, chief acquisitions officer at Advenir.

The latest unemployment rate in Denver was 8.7 percent in June 2011, according to the Bureau of Labor Statistics. (This is compared to the national average of 9.2 percent during the same period.) And, Vecchitto points out, the greater Denver area has “a great incubator system for entrepreneurs on the tech side,” with investors in Boulder helping to create new business and new jobs.

Of course, it doesn’t hurt that the target renter demographic of 20- and 30-somethings are moving out to greater Denver because of job growth and quality of life. Occupancy in Colorado Springs, specifically, is currently averaging 96 percent, reports Linden. At the same time, effective rent growth in top-tier submarkets is anywhere from 5 percent to 8 percent year-over-year.

Additionally, Linden tells MHN, there is great opportunity in the value-add play, as the market has seen “a clear premium on those units that are upgraded in the marketplace, achieving rents anywhere from $50 to $125 [more].”

The marketplace appears to be comprised of institutions and pension funds seeking core A assets, while private firms are more likely to seek out Class B opportunities, observes Vecchitto.

“The market has really been flat in terms of rent growth over the last 10 years,” points out Linden, “so you have owners [who] held on for a long time, and equity is now saying, ‘the market is ripe; it’s time for us to exit.’”