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Colorado Multifamily Deal Underscores Buyer Demand in Spite of Challenged Investment Climate

Inland Private Capital Closes Nearly $68 Million Disposition of Colorado Springs Apartment Complex

Investment manager Inland Private Capital acquired the Estate at Woodmen Ridge Apartment Homes in Colorado Springs in 2017. (CoStar)

Capital is expensive and financing standards have tightened, but for some of the nation’s fastest-growing markets, investors are still willing to chase after multifamily deals.

 

Real estate investment manager Inland Private Capital is the latest seller able to leverage the rising demand after finalizing a $67.7 million sale of an apartment complex it acquired more than half a decade ago in Colorado Springs, Colorado. Northland, a Massachusetts-based real estate private equity firm that has been chasing population growth, was the buyer in the deal for the Estate at Woodmen Ridge complex.

 

The property at 5520 Woodmen Ridge View is Northland’s second Colorado multifamily acquisition and adds another 260 units to the firm’s expanding portfolio.

 

While the investment is Northland’s first in the Colorado Springs region, the firm said it won’t be the last.

 

“We are committed to expanding our portfolio in the region,” Everett Palozej, Northland’s director of investments, said in a statement. “Colorado Springs continues to be a very attractive city for both employers and residents due to the market’s educated talent pool, low cost of living and high quality of life. We see these factors as key drivers of long-term economic growth.”

 

The deal, which was confirmed by Inland, closed late last month at a price tag just shy of $260,400 per unit.

 

To compare, the average per-unit price among other multifamily deals that closed in the Colorado Springs area over the past year has been about $237,700 per unit, according to CoStar data. That figure has steadily dropped as a result of the challenged investment climate in which buyers, facing higher borrowing costs and stricter lending standards, have found it increasingly difficult to find deals that can pencil out.

 

For Colorado Springs, that has meant values have fallen as the cost of debt has climbed, CoStar Director of Market Analytics Jeannie Tobin said, meaning multifamily owners have chosen to hold on to their properties and wait out some of the current challenges.

 

Higher-end, well-leased properties in prime locations have proven to be an anomaly, however, with buyers proving themselves willing to shell out a premium to position themselves for what they bet will be an imminent rebound.

 

Los Angeles firm Benedict Canyon Equities, for example, last year dropped $82.2 million to acquire Bellaire Ranch, a two-property multifamily portfolio that included the main 240-unit complex at 4275 Sanders View Drive and the newer Alturas at Bellaire Ranch portion, which has another 60 units at 1130 Bell Tower Heights. The deal shook out to just shy of $275,000 per unit, according to CoStar data.

 

Alongside a record spike in rents and leasing momentum, Colorado Springs has become especially popular among investors, developers and tenants for its location about an hour south of Denver and proximity to major employers such as Lockheed Martin, United Health Group, Progressive Insurance, Oracle, T. Rowe Price Group and USAA, all of which have fueled the city’s multifamily market.

 

Rents at the Estate at Woodmen Ridge complex average about $1,775 per month, according to CoStar data, a healthy increase compared to the roughly $1,330 per-month average back when Inland acquired the property in 2017.

 

The Colorado Springs deal extends a recent buying streak for Northland, which targets regions for their “long-term potential” and focuses on “high-growth, low-tax markets with strong economic trajectories [and] strong affordability and cultural appeal,” according to the firm’s website. Its existing multifamily portfolio spans upward of 80 properties in states such as Florida, Texas, California, Arizona and Minnesota.

By Katie Burke
CoStar News