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Real Estate Bisnow Real Estate Bisnow
January 10, 2013
Investor's Big Bet

TM Equities is doubling down on Denver’s multifamily market with two recent buys, after selling its massive Kennedy Ridge complex.
tm equities roger thompson james michie andante nine mile station stone canyan denver multifamily ara jeff hawks doug andrews terrance hunt shane ozment
TM Equities EVP Roger Thompson—seated, with prez James Michie—tells us capital is very hungry for multifamily product. His firm just bought both the 212-unit Andante at Nine Mile Station (formerly Broadstone Vesta) and Windrock and Stone Canyon apartments (now soley called Stone Canyon)—totaling 660 units—for $82.8M, or over $125k/unit. Why is the Salt Lake City-based investor sweet on Denver? Roger says they believe the market is growing and rents will be climbing. Given Windrock and Stone Canyon’s proximity to Denver's tech hub, the firm expects long-term viability with rental appreciation.
Brookfield (1801) JDEN
Roger declined to disclose the cap rate but says TM Equities is a long-term holder; it just sold Kennedy Ridge, a Class-A apartment complex with more that 950 units, after 12 years. Roger says that TM's biggest competition (aside from other apartment properties) is from single-family housing—but even with Denver’s booming economy, people are not flooding back into the ownership ranks.

ara justin hunt, shane ozment terrance hunt chris cowan denver multifamily apartments rent growth union station
Atlanta-based ARA’s Justin Hunt, Shane Ozment, Terrance Hunt, and Chris Cowan—who brokered the sale of the apartment communities to TM Equities—tallied more than $1B in transactions last year in Colorado. What's driving investors, says Terrance, is an average 10% rental growth rate, second only to San Francisco. Investors' focus, of course, has been on Downtown Denver, particularly near Union Station. That area's demand spike has caused a corresponding drop in cap rates, at sub-5% for strong properties, he adds.
Chris expects Downtown rents to stumble a bit in 2014 and 2015 as 7,000 new apartment units start coming online. But the growing number of young professionals wanting to live around Union Station—many moving in from other states—will reverse any near-term losses over time. It's also growing organically: 35,000 Denverites are turning 21 this year (there's going to be a mammoth joint birthday party).

equity residential greystar cherry creek sonata apartments
Greystar’s pending acquisition of Equity Residential’s massive $1.5B multifamily portfolio includes more than 1,000 units in Denver for $156M. (ARA is involved in this deal as well.) Among the properties: Crescent at Cherry Creek on South Dexter Street; Sonata at Cherry Creek (above); Sonoran at 13625 S 48th St; Warwick Station on Dover Street, Westminster; and Whisper Creek on South Nelson Circle, Lakewood.
greystar ceo bob faith equity residential portfolio multifamily apartments denver
CEO Bob Faith (snapped this week promoting his modest lending library) tells us his firm and Goldman Sachs' acquisition of 8,010 apartments across 27 properties from Equity Residential will close in two tranches by the end of March. It’s free to exclude as much as 8% of the portfolio after due diligence, but Bob tells us his intention is to take them all. The parties know each other well: Goldman Sachs owns 20% of Greystar, and as co-founder of Starwood Capital, Bob sold a large portfolio to Equity Residential in 1993. The portfolio is 95.5% occupied, yet value can be harvested via improvements, leading to higher rents.
Bob tells us he was attracted to the Denver portion of the portfolio (including Warwick Station, above) due to the economy’s strong job growth performance and its exposure to the energy sector. The best part about buying from a public company, Bob says, is all the property info is “available." (It's the same reason we only date people who use Google+.) Greystar was able to shop Equity Residential’s portfolio and propose a geographically diverse portfolio that also spans DC, Northern NJ, South Florida, Orlando, San Francisco, Los Angeles, and Phoenix.
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