Oak Coast Properties, BMC Investments Score Denver Apartments for $50.8M

Oak Coast is planning a $2.5 million renovation of the property, which is the first acquisition in a series of investments to meet its $300 million target for 2016.
The Artisan, Denver

The Artisan, Denver

Los Angeles—‘Value add’ is the name of the game for Oak Coast Properties and BMC Investments‘ $50.8 million acquisition of The Artisan Townhomes and Apartments in Denver. Oak Coast plans to complete a $2.5 million renovation and repositioning of the property, including improvements to interiors, exteriors and amenities.

“We see an opportunity to invest capex into the property, improve the tenant experience, and push what we see as under-market rents,” Phillip Nahas, Oak Coast Properties’ managing partner, told MHN. “The Artisan also bring a unique advantage with 65 percent of the units being larger townhouse floor plans, which will appeal to families.” He added that the company plans to first handle the deferred maintenance so it can then focus on improving amenities.

HFF‘s team of Brock Yaffe and Charles Halladay helped secure a $41.9 million loan for the buyers through Freddie Mac’s CME program. Jordan Robbins and Jeff Haag of HFF represented the seller, Peak Capital Partners.

The Artisan acquisition marks Oak Coast Properties’ first of several acquisitions that are planned to meet the company’s goal to invest $300 million in the multifamily sector in 2016.

“Last year we had a goal of $150 million and we did over $200 million,” Nahas said. “With the committed funds from our investors, we have the capital to deploy that will allow us to purchase $300 million.”

This is also the second acquisition the two companies have done together, with the first being the $65 million acquisition of the Liberty Creek Apartments in Aurora, Colo, in October 2015. BMC Investments CEO Matthew Jablon said the companies’ strategic partnership has grown because of their aligned investment objectives.

Nahas added that the transaction marks more than $500 million the company has invested in multifamily and hotel assets in three years and brings its Denver apartment portfolio to more than 1,500 units. “[The acquisition] provides an opportunity for significant upside potential through a renovation plan that capitalizes on rising rental rates, unit demand and lack of new supply in this in-demand region.”

The region Nahas is discussing is the Southeast submarket of Denver, which is one of the strongest in the Denver metro area with average annual rent growth of more than 10 percent since 2012. The submarket also lacks new supply, with just two new properties within a three-mile radius. Nearby properties have planned renovation programs to boost rent prices, similar to what Oak Coast Properties has planned for The Artisan.

The Artisan, Denver

The Artisan, Denver

“With other value-add deals in Denver, we have seen strong rent growth driven by consistent employment and population growth. We believe the Denver market is a great long-term play,” Nahas said.

The Artisan also boasts a strategic location, just  one mile north of the Dayton Station that has access to the I-225 Light Rail Line. The community is also within walking distance to Hampden Avenue—one of Denver’s primary retail corridors—and two miles north of the Denver Tech Center and Southeast Business Corridor, the largest employment center in the Rocky Mountain region.

The 434-unit property has a mix of one-, two- and three-bedroom floor plans spread throughout two- and three-story buildings. Units feature walk-in closets, private patios or balconies and vaulted ceilings. Amenities include a fitness center, business center, two clubhouses, two swimming pools, onsite laundry and a sport court. BLDG  Management, the property management company affiliated with BMC Investments, will manage the property.

Since 2013, The Artisan has undergone about $3.2 million in capital improvements. Originally built in 1973, Oak Coast Properties’ latest renovation plan will continue these recent efforts with upgrades to the clubhouses, air conditioning, pools, landscaping, carports and exterior paint and siding.

Oak Coast Properties is actively pursuing class B and C multifamily and hotel property acquisitions in order to complete value-add, long-term investment strategies to increase NOI growth potential.

Nahas said the company will continue to look for properties in Denver, but also nationally. “When we enter a market because we believe in the macro fundamentals of that area, we aren’t looking for just a one-off deal, we would like to achieve some scale.”