Affordable Housing Portfolio Sells in Northern Colorado
Three affordable housing apartment communities in Northern Colorado have sold for $8,650,000, according to Skyler G. Cooper, regional manager of Marcus & Millichap’s Denver office. Together, Centennial Village in Evans, the Camelot Apartments in Greeley, and the Villa 14 Apartments, also in Evans, total 104 units.
This was the buyer’s first affordable transaction and represents a long-term play. According to Beverly, the deal demonstrates increasing interest in affordable deals among market rate investors. “Affordable deals offer a safe harbor for investors who think the current cycle is long-in-the-tooth or who feel uncertain about pandemic conditions,” he said.
Centennial Village, an elderly-designated, nine building, 48-unit apartment community, is located in Evans, Colorado. The property, built in 1982, was developed utilizing HUD 221(d)(4) financing. The property’s mark-to-market use agreement extends through November of 2031. The property sold for $3,850,000.
Villa 14 Apartments is also an elderly-designated apartment community, consisting of four buildings and 36 units, located in Evans. The property, built in 1982, was developed utilizing HUD 221(d)(4) financing. The property’s mark-to-market use agreement extends through November of 2033. The property sold for $2,550,000.
The Camelot Apartments is a 20-unit apartment community located in central Greeley. This property underwent a $500,000 renovation at the end of 2019 and recently received its RAD-2 conversion. The property sold for $2,250,000.
This portfolio allowed the buyer to establish a large footprint in the Greeley metro area while utilizing financing to maximize the spread between interest and capitalization rates. In addition to strong HAP and LURA contracts, minimal turnover rates and a two-year waiting list for new tenants made this a safe asset. This sizable portfolio provided the buyer with a unique opportunity, combining value with little need for asset improvements.
Phillip Gause, first vice president capital markets in the firm’s Denver office, secured the financing for the portfolio. Interest rates were 2.98 percent, 3.08 percent, and 3.12 percent for Centennial Village, Villa 14, and the Camelot Apartments, respectively.
“We were very pleased to have assisted the Sponsor in this transaction by arranging very competitively priced, long term fixed rate non-recourse portfolio financing on his behalf. As evidenced by the terms of the financing the overall environment for permanent debt secured by deed restricted affordable housing continues to be very competitive despite the dislocation caused by the COVID-19 pandemic,” Gause commented. “While there were certainly some challenges posed by issues related to the pandemic, we were also able to take advantage of the declining interest rate environment and close at rates roughly 100 basis points lower than those quoted at application. Our strong relationship with the lender also helped us work through a fairly complex and challenging set of regulatory, legal, and underwriting hurdles to get this transaction across the finish line.”