Q2 2012 Denver, Colorado Apartment Property Sales Analysis

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Q2 2012 Denver, Colorado Apartment Property Sales Analysis

Metro Volume and Pricing

Apartment investment activity has been strong.* The $758.3 million that changed hands in 39 transactions in the first half of 2012 kept the market on pace with the $1.57 billion earned for 66 deals all told in 2011. The $449.2 million exchanged in 18 deals during the second quarter alone amounted to the largest single-quarter total since the fourth quarter of 2011. The average selling price for the latest quarter’s sales was high at $120,000 per unit; the year-to-date average was $97,000.

Deals since the quarter ended: JRK Property Holdings Inc. bought the 340-unit, 17-building Broadstone Southlands complex, 24750 E. Applewood Place, Aurora, built in 2008, for $42.75 million, the Journal reported in August. Alliance Residential Company was the seller. The deal was JRK’s second major investment in the metro Denver market this year. In May it acquired the Briargate on Main apartment complex in Parker. In July, Archon Group LP, doing business as ERGS XI REO OWNER LLC, bought four Front Range Colorado properties with a combined total of 1,164 units. Two of the properties were in the metro Denver market—the 482-unit Waterfield Court in Aurora, which fetched $40.17 million; and the 186-unit Rolling Hills in Castle Rock, purchased for $14.25 million. The other properties were in Colorado Springs. Also in July, Holland Residential paid Fairfield Residential Company LLC $42.5 million for the 385-unit Legacy Heights at 2700 W. 103rd Avenue, Federal Heights. Fairfield bought the property in 2006 for $36.1 million.

Top Submarkets

Sales activity has been distributed amply among a number of submarkets; seven saw more than 1,250 units change hands over the past four quarters. In the lead in both property number and dollar volume was the Denver-Southeast submarket, where 2,297 units sold for a combined total of $231 million. The average selling price was $100,558 per unit. Ranking in second place in terms of the number of units sold was Denver-Far SE, at 1,964 units (for a total of $180 million). Lakewood-South’s 1,775 units, trading for a total $149 million, ranked it third in units sold. In second place based on a per-unit price of $114,313 was Northglenn-Thornton’s 1,586 units, ($181 million total). The highest average per-unit selling price, for 1,353 units exchanged, was Douglas County’s $142,461 ($193 million total).

Cap Rate Comparisons and Forecasts

The average cap rate measured by the quarter has jumped about somewhat in the recent past. At 5.1%, the average for second quarter’s 18 transactions was the lowest since the first quarter of 2011. The steadier 12-month rolling cap rate dropped under 6.0% in the second quarter last year and has remained there since. The 12-month rate for the latest quarter was 5.7%, down from 5.8% the quarter preceding, down from 5.9% as of second quarter 2011. Reis expects the 12-month rate to linger in the vicinity of 6.0% for the foreseeable term. Second quarter 12-month rolling rates for the Western region and the nation as a whole were 6.3% and 6.5%, respectively, both unchanged from the quarter before.