Get the latest DB Capital News
Sign up with your email address to receive news and updates.
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
By Brennen Degner
My last DB Blog posts focused primarily on what we are seeing on the acquisitions side and what our general thesis is on the broader multifamily market in the near term. Today I wanted to focus on a relatively new phenomenon that we are seeing in operations, a significant spike in aged receivables we carry across the portfolio. At a time when operating costs and interest rates are rising at a rapid clip, the additional blow to cash flow is driven by the fact we are seeing total receivable balances at an all time high.
When you peel the onion on our collections picture we find that the increased level of total AR is generally highly concentrated in just a few residents. Historically, assuming the management team was dialed in on their notice and eviction process, it was rare to see any single tenant accrue such a large balance. What we are seeing is that these large balances are made up almost entirely of tenants who are waiting on money from assistance relief programs, including but not limited to the local funds allocated from the Emergency Rental Assistance Program (“ERAP”).
To no surprise, we are seeing the general gridlock associated with anything managed by the government making its way into our property balance sheets. As an example, we have an asset in the Denver submarket where we are owed over $145,000 from ERAP. The money is a collection of tenants owing as much as five months of unpaid rent. Each individual tenant (as of the time I am writing this we have 25 residents at the property waiting on ERAP payments) has their own specific nuances as to why the funding has been delayed. Sometimes it is because the tenant’s file went from one case worker to another. Sometimes it is because the tenant filled out a portion of their application wrong and it gets kicked to the back of the line. Sometimes it is because after weeks of trying to get answers on the tenant’s file from various caseworkers they finally tell you that the tenant submitted to the wrong assistance program. The most recent excuse was that the manager assigned to releasing the funds was out on vacation so the $100,000 of approved applications would have to wait for them to return to be sent out. On a related note we currently have a full time corporate employee dedicated almost exclusively to dealing with assistance payments in our various markets.
Meanwhile, the properties obviously go on operating. Expenses related to the tenant occupying that unit build up and guess what, the utility company isn’t going to wait until the ERAP caseworker is back from their two week vacation to get paid. Unfortunately, this isn’t an isolated incident and although on the extreme side as far as total balances for one property, the reasoning for the delay in payment is consistent across the portfolio. It is like calling the DMV to collect on your resident payments.
The good news is we are seeing a downward trajectory on the trend of tenants needing to apply for any ERAP assistance. I am hopeful that we are in the midst of a last wave and that the expectation going forward is for that trend to continue the downward movement until stabilizing collections back at a more normalized figure. I am curious to hear if other operators are seeing the similar issues? Feel free to reach out to discuss and mention any tricks you are using to make the process more streamlined.
How Supply Delays, Inflation Are Slowing Apartment Renovations
Source:
The worst of the bottleneck may be over, but higher prices and labor issues are making the situation worse.
The supply-chain issues that have plagued multifamily owners and operators since the start of the COVID-19 pandemic have eased in recent months. But industry executives report that lingering delays are now compounded by inflation-induced increases in the cost of materials and labor challenges.
The ongoing challenges have forced value-add players in particular to get creative and change how they procure materials. While some companies already have their own construction divisions for their remodeling projects, others have begun doing more work in house to help keep costs and wait times down.
“We usually try to renovate units within two weeks,” Zamir Kazi, CEO of Tampa, Fla.-based ZMR Capital, told Multi-Housing News. “They’re taking three to four weeks now.”
ZMR Capital, which owns more than 7,000 apartment homes in Florida, Georgia, Arizona and Texas and recently entered the Las Vegas market, is paying about 20 percent to 25 percent more per unit for renovations, Kazi said.
Joe Goldstein, managing partner of Beverly Hills, Calif.-based Concord Real Estate Services, said it costs 30 percent to 40 percent more to remodel a one-bedroom apartment now than it did in February 2020 before the COVID-19 pandemic hit. Concord owns and/or manages about 5,000 units mostly in small apartment buildings in the Los Angeles area as well as Dallas. The company handles its own construction and financing in house with a construction team of about 40 and a team of subcontractors.
“The biggest challenge in the supply chain was obviously costs going up and underwriting costs for a $900 set of appliances and then you turn around and that same set of appliances is $1,600,” said Goldstein. “And you underwrite flooring to cost you $1.25 per square foot and the same flooring costs you $2.50 a foot.”
Goldstein said the company, which sat on the sidelines in the early part of the pandemic, acquired about 1,000 apartments in the past year. “But we were underwriting up,” he said. “We knew where the pricing was going. For us it’s all about planning. As long as we were able to project that things would cost this much more, the deal still penciled.”
Higher prices for both materials and labor are also pushing up the bidding for value-add multifamily acquisitions by at least 20 percent, according to Brennen Degner, CEO, managing partner & co-founder of DB Capital Management.
Headquartered in Denver, DB Capital is a vertically integrated real estate investment group with more than 3,000 multifamily units valued at more than $600 million under management across the United States. DB Capital has its own in-house general contracting firm, Peak Renovations, which gets about 80 percent of its revenues from DB Capital’s project and handles much of the purchasing.
“When we’re developing the budgets in those business plans, we’ve seen those numbers just continue to creep up and up and up,” he told MHN. “A lot of it is on the labor side. The labor side has been as challenging as, if not more challenging, than anything we’re seeing on the supply side. The supply of labor has been an ongoing battle for us.”
NMHC Survey Details
DB Capital Management of Denver acquired The Boulevard, a 296-unit apartment community in Las Vegas, for $64 million in October that will be renovated and rebranded Summit on Nellis. Image courtesy of DB Capital Management
The most recent NMHC Construction Survey released in late September found labor costs as well as the availability of construction labor to still be a problem. The quarterly survey from the National Multifamily Housing Council found 21 percent of respondents said labor costs had increased at a rate greater than expected, down from 40 percent of respondents in the previous quarter and from 55 percent in March. About two-thirds of respondents (68 percent) said labor costs had increased as expected over three months, while 11 percent though labor costs did not increase at all.
More than half (57 percent) of respondents reported construction labor availability roughly the same as the previous three months. But 11 percent reported a greater availability of labor compared to 7 percent in June and 0 percent in March. Less than a third (32 percent) of respondents reported labor to be less available, down from 40 percent in June and 63 percent in March.
The survey also found that construction delays continue to be a problem, with 90 percent of respondents experiencing delays for a variety of reasons including 53 percent reporting materials sourcing and 41 percent citing economic uncertainty as a contributing factor to delayed starts. Seventy-six percent said they had to reprice deals up an average of 9 percent.
Paula Cino, NMHC vice president, construction, development and land use policy, said it looks like the spring and summer “seem to be a high-water mark” in terms of unpredictability and volatility.
“When we look at our September survey, we do see some deceleration in price escalation,” Cino said. “There are certainly prices of certain materials that have continued to increase in price and we’ve seen some tightening of availability in specific materials, but we’ve also seen broader loosening of the supply chain.”
But it could be too early to say if there will be a continued downward trend or if some bumpiness is still to be expected when it comes to supply-chain availability and pricing. She said going forward issues could be more material specific than several months ago “when we were just seeing escalations across the board.”
The price of lumber, which skyrocketed in 2021, is an example where there has been an ebb and flow in recent months, Cino said.
Respondents in the September survey reported an average drop in lumber prices for the second straight quarter, down 2 percent over the previous three months. Those consecutive quarters of decline came after a 45 percent reported average increase in the first quarter of 2022. By comparison, the June 2021 NMHC construction survey found on average respondents had experienced a 201 percent price increase in lumber costs over the course of a year.
Real estate and construction attorney Barry LePatner, principal of LePatner & Associates LLP, noted the lumber market prices spiked in May 2021, when they had increased 400 percent over the previous year.
“That’s an incredible assault on the market,” LePatner said. “Prices have been slowly adjusting, but supply has been limited because the industry has not been able to get back out there and do a lot of harvesting and governments have put limits on harvesting. So, they can’t meet these needs and there’s only a finite number of mills to begin with.”
The NMHC construction survey found prices for other essential products had increased but at the same or lower rates than in previous quarter, including a 12 percent increase in electrical components. The report found 51 percent of respondents changed schedules to mitigate price increases or supply shortages of electrical components.
While the shortage impacts multifamily developers building new construction more than owner-operators who are doing renovations, Cino said it’s increasingly an issue being raised by members. And it could impact those property owners doing gut rehabs or large-scale renovations.
The National Association of Home Builders was so concerned about the shortage of electrical components it sent a letter to President Joe Biden on Oct. 17 calling attention to an increasingly dire situation they feared would become even more of a problem in the wake of Hurricane Ian. Also signing the letter were the Associated Builders and Contractors, Association of General Contractors and Independent Electrical Contractors.
Supply Solutions
Degner said they have seen “isolated incidents” with shortages of electrical components, but it’s not had a major impact on DB Capital’s business.
“We’ve turned around older buildings where we had to upgrade the electrical infrastructure but that’s a pretty finite amount of our scope of work,” Degner told MHN. “It’s not something that is keeping me up at night like the appliances were at one point.”
In the NMHC survey, respondents reported an average 6 percent increase in the price of appliances and 32 percent said they had to use alternative products, down from 40 percent in June and 45 percent in March. In other common materials used to renovate apartments, the survey found 32 percent of respondents had to substitute products for hardware items, including cabinet hardware, and 49 percent had to find alternative light fixtures.
Goldstein said the wait for appliances has improved. Prices, however, he said, are about 30 percent higher than pre-pandemic. Concord pivoted from using a local supplier to a national supplier that could buy appliances in bulk. For routine maintenance, they took inventory of all their systems, such as HVAC units, and began pre-ordering supplies of common parts. They created stockrooms at every site with inventory they believed were the most important and became more diligent about preventative maintenance.
ZMR Capital began buying in bulk, straight from the manufacturer. “It helps when you’re buying things at scale. They put you to the top of the list,” he said.
While buying in bulk is working for Concord and ZMR Capital, DB Capital is making fewer bulk purchases.
“Economies of scale don’t seem to exist right now,” he said. “Your best deals are found on a one-off basis. A lot of our suppliers just can’t provide things in bulk. It feels like it should have been worked out by now but candidly, it hasn’t. It’s just really hard to plan.”
While timelines to receive items like appliances have improved since the height of the pandemic, going from months to weeks, Degner said the lag time is still slowing down turnover of apartments.
“Sometimes we’ll experience move-in delays simply because we’re waiting for those cabinet faces to show up,” he said.
Aaron Cohen, chief operating officer at Los Angeles-based CGI+ Real Estate Investments, said the supply-chain issues have forced the private real estate investment firm to become more creative. They seek alternatives that have the same aesthetics, but they keep costs inline by doing much of the work in house, using different vendors, sourcing some things locally or even from Amazon.
In some cases, when sourcing materials, the gap between luxury and ultra-luxurious materials has shrunk to a certain extent, Cohen said.
“You could get a really nice countertop for almost the same price as a less nice countertop,” he said.
CGI+ also orders materials further in advance, 60 to 75 days vs. the previous 35 to 48 days. But he doesn’t want to do bulk ordering for several reasons: Prices may soon flatten or go down, he likes the ability to change up a renovation and lastly, he worries about theft if there is a large overstock of materials on hand.
Cino said there are some lessons learned by the multifamily industry about supply-chain redundancy and being able to pivot when faced with shortages or delays.
“There are certain solutions that may continue going forward in terms of pre-purchasing supplies and warehousing that may outlive this COVID period,” she said. “People may just think that, as a good risk management and good insulation against unavailability and price increases, this may make sense.”
Source:
Newmark announces the sale of ReNew at TPC, a 408-unit, value-add multifamily asset located in northeast San Antonio, Texas. The property traded from FPA Multifamily—a San Francisco-headquartered, privately held multifamily investment firm—to DB Capital Management, a private multifamily investment firm based in Playa Vista, California. Newmark Vice Chairman Patton Jones, Senior Managing Director Matt Michelson and Managing Director Andrew Dickson represented the seller in the transaction.
“ReNew at TPC presented investors with an outstanding value-add opportunity in the highly sought-after North San Antonio submarket,” said Jones. “The asset’s location near Stone Oak surrounded by affluent demographics and expensive single-family homes attracted significant private investor interest focused on contemporary upgrade opportunities. ReNew at TPC will be an excellent addition to DB Capital’s growing Central Texas portfolio.”
ReNew at TPC is a 408-unit, garden-style apartment community located at 5707 TPC Parkway in San Antonio. The property features a mix of studio, one-, two-, three- and four-bedroom units with an average unit size of 905 square feet. Unit interior features include nine-foot ceilings, hardwood-style flooring, kitchens with stainless steel appliances and granite counter tops, and oversized walk-in closets. Community amenities include a pool with sundeck and lounge seating, grilling areas, clubhouse with resident lounge and executive business center, 24-hour fitness center and fenced dog park.
The average household income within a one-mile radius of ReNew at TPC is nearly $120,000 per year, while 51.3 percent of this same population holds a bachelor’s degree or higher. The property is proximate to an abundance of major employers in the area, including the RidgeWood Park (home to Marathon Petroleum Corp.), Sonterra Medical Center, JP Morgan Chase Corporate Center, Amazon, and the Randolph Brooks Federal Credit Union (RBFCU) headquarters. Surrounding retail destinations including Village at Stone Oak, Legacy, Northwoods, Sonterra Village and The Vineyard. Additional nearby attractions include multiple golf courses, resorts and parks, including JW Marriott San Antonio Hill Country Resort and Spa.
Following a record 2021, investor demand for multifamily remained robust during the first quarter of 2022 with $63.0 billion in U.S. sales volume, according to Real Capital Analytics data analyzed by Newmark Research. In addition to this volume signifying the largest first quarter on record, year-over-year volume accelerated 65.4 percent. Trailing twelve-month volume increased to $374.3 billion. Remarkably, major markets in Florida and Texas accounted for 27.3 percent of total volume over the past 12 months.
Source:
Salt Lake City — Multifamily investment firm DB Capital Management (“DB Capital”) continues to expand its Utah presence with the acquisition of Marmalade Hill, a 71-unit apartment complex in downtown Salt Lake City for $18.6 million.
Located less than a block from US 89 and a mile from Interstate 15, the Marmalade Hill community offers easy access to all of Downtown Salt Lake City’s important employment hubs and is within walking distance to the state capitol. The apartment complex is also close to entertainment and recreational areas such as Vivint Arena, mixed-use developments City Creek Center and The Gateway, and City Creek Canyon. Marmalade Hill also is within 30 minutes of five of the most popular ski resorts in Utah.
“Salt Lake City continues to be one of the top-performing markets in the nation in terms of population growth and unemployment, which combined with a youthful demographic in its prime renting years and relative affordability, drives the Salt Lake City multifamily market into the upper echelon in the US,” says Darren Hulick, Regional VP in charge of overseeing DB Capital’s market presence in Salt Lake City and Denver.
The firm identified Salt Lake City as a key target market following its founding in 2018 and has acquired 10 communities ranging in size from 17 – 150 units throughout the metro. After successfully executing its business plan and exiting several investments, DB Capital currently manages a portfolio totaling approximately 2,200 units.
DB Capital plans an 18-month renovation program that includes updates to unit interiors, exterior, and amenities, as well as the resolution of all deferred maintenance at Marmalade Hill, which was built in 1953 and later added onto in 1972. Interior improvements will include quartz countertops in the kitchen and bathrooms, vinyl plank flooring and new carpet, new appliance packages including washers and dryers, new paint, modern plumbing and lighting fixtures throughout, and new bathroom accessories. Exterior and common area renovations will include new paint, the addition of a built-in BBQ/courtyard area, the conversion of a laundry room into a leasing office, and landscaping upgrades.
“We look forward to add value to Marmalade Hill’s excellent location through our strategic, design-driven renovation plan,” says Hulick. “The opportunity to acquire this kind of well-located asset at a significant discount to replacement cost is what really got us excited about this property.”
The property was 96 percent occupied at the time of closing. DB Capital was represented in the acquisition by Brock Zylstra and Danny Shin of Institutional Property Advisors.
About DB Capital Management
DB Capital Management (http://www.dbcap.com) is a vertically integrated real estate investment group with over $400MM in AUM based in Playa Vista, CA. DB Capital Management focuses on owning and operating multifamily property in strategically targeted submarkets across the United States. The DB Capital Management strategy revolves around a hands-on approach to acquisitions and asset management, coupled with an extensive understanding of each target investment submarket, which leads to maximum revenue generation and subsequent value.
Source:
Legacy Capital Partners (“Legacy”), a Cleveland, OH-based national real estate investment firm and DB Capital Management (“DB”), a Los Angeles, CA-based real estate owner and operator, have acquired Summit at Salado Creek, a 1997-vintage, 352-unit apartment community in San Antonio, TX (“Salado Creek”).
Legacy and DB acquired Salado Creek as part of their value-add strategy and plan to increase value through the execution of the property’s interior renovations to a Class A finish, as well as planned upgrades to common areas and exteriors to improve the quality of the overall community for its residents. The San Antonio metro population has grown nearly 20% between the 2010 to 2020 census and is projected to continue its robust growth. The property is in a strong infill submarket with limited new development nearby and proximity to major employers including USAA, the South Texas Medical Center and Valero.
“We’re thrilled to acquire Salado Creek, which has performed well through the pandemic, and to continue enhancing resident experience through our business plan. This is Legacy’s first joint venture with DB Capital Management, and we look forward to growing the partnership,” said David St. Pierre, Managing Director at Legacy.
About Legacy Capital Partners:
Legacy Capital Partners is a real estate private equity firm founded in 2004 by Mitchell C. Schneider and David B. St. Pierre. Since its inception, Legacy has invested in 75 properties in 18 states with a total cost basis of $2.13 billion. Since October 2009 Legacy has invested exclusively in for-rent multifamily properties and is actively deploying capital out of its discretionary Funds. For more information about Legacy Capital Partners, visit www.lcp1.com.
About DB Capital Management:
DB’s mission is to be the leading multifamily investment group in each of their focus markets and always exceed clients’ expectations. DB is strategically aligned with both its property management group as well as its general contractor in order to provide transparency and accessibility on the asset management side. DB currently invests in 5 states, with approximately half of its portfolio based in Texas. For more information about DB Capital Management, visit www.dbcap.com.
Source:
Playa Vista-based real estate investment firm DB Capital Management is increasing its attention outside of California, lining up deals in other states where it views the risk as lower. The company is on track to close $100 million worth of deals this quarter and expects to have $100 million worth of exits.
As part of this strategy, DB Capital has acquired a 150-unit property in Austin, Texas. Dubbed Laurel Woods, it’s DB Capital’s sixth acquisition in the state. The company plans to rebrand the property, which includes 12 two-story buildings, as Summit at Westwood. It is also planning upgrades.
DB Capital first entered the Austin market in 2018 and now has just under 1,000 units in the market out of the company’s roughly 2,000-unit portfolio. The firm expects to close an additional 464 units in Texas by the end of the year.
DB Capital Chief Executive Brennen Degner said the company got its start doing “smaller, value-add rent-controlled deals in Los Angeles.”
Soon, however, it switched strategies because “it got to the point where there were a lot of things that weren’t working about investing in Los Angeles,” Degner said.
“Things weren’t really favorable in L.A. from our perspective, so we started to look at other markets,” he added.
DB Capital first looked at Salt Lake City before betting big on Texas.
Now, in addition to Salt Lake City and Austin, the company is looking at other lower-cost markets with a lot of tech talent migration, such as Denver. It previously invested in Portland, Ore., as well.
“We really found our footings in these markets where we see a lot of people migrating to,” Degner said.
Development in those areas is also important.
“We really like to be in areas where we can draft off of new development and ride the wave of that rent growth,” Degner added.
The company still has assets on L.A.’s Westside that it is actively trying to sell, Degner said, adding that the company has no plans at this time to buy in L.A.
“The political landscape in California creates so many uncontrollable factors, and we like to focus on being very good at the things that we can control,” he said. “Investing in California has added layers of additional risk that are outside of our control that we can’t reflect in our underwriting.”
He expects the company will be busy elsewhere, though.
DB Capital generally holds on to assets for three to five years, but the exact time frame depends on who the company’s capital partners are for a specific asset.
Degner said the company is focused on garden-style multifamily assets.
“We’re really location focused,” he said. “We try to find old, value-add assets in areas where it’s impossible to build anywhere close to our (standards). As construction costs go up, to build garden-style, the cost has gone up considerably.”
Degner added that the company is mainly purchasing properties built in the 1980s and ’90s, and it prefers properties with 200 units.
“We want economies of scale, but it’s not so big that we compete with groups with more capital,” Degner said.
These properties are generally in the $20 million to $60 million range.
Once DB Capital acquires a property, it allocates anywhere from $3,000 to $5,000 a unit for light renovations or up to $40,000 a unit for heavy value-add properties.
Looking forward, Degner said, the company is hoping to do two deals a quarter, totaling $70 million to $100 million and will be upgrading properties as it goes.
The company, which has six employees, also partners with a Dallas-based general contractor firm and owns Playa Vista-based Skyline Management Group Inc.
Degner said he has no plans to take the company away from apartment rentals, however.
“We’re going to keep heading down the same path,” he said. “Multifamily has been a very good asset class for us, and I don’t think it’s going anywhere. I’m a big proponent of trying to stay in your lane.”
Source:
DB Capital has acquired Layton, Utah-based Twin Trees Apartments, a multifamily community. No financial terms were disclosed.
Multifamily Investment firm DB Capital Management added to its growing footprint in Utah with its acquisition of Twin Trees Apartments, a 43-unit multifamily community located in Layton, UT, approximately 20 minutes north of Downtown Salt Lake City.
DB Capital Management’s investment strategy is focused on secondary and tertiary markets exhibiting strong multifamily fundamentals. Located in Davis County, Layton is a thriving community in the heart of Northern Utah that USA Today ranked tenth on its list of America’s Best Cities to Live. The market’s low cost of living and growing job market has resulted in impressive population growth creating strong demand for quality rental housing and Q2 2021 year-over-year rent growth of 14.1 percent ranking highest in the state.
With the acquisition of Twin Trees and the recent sale three Salt Lake City properties, DB Capital’s portfolio in Utah now totals approximately 300 units and includes properties in Salt Lake City, Provo and now Layton.
The firm’s reputation for being a closer in this market has been a key factor in winning deals, especially in an ultra-competitive state like Utah, according to DB Capital Vice President Darren Hulick.
“We’re using our extensive network of contacts and relationships to help us unearth investment opportunities like Twin Trees which we were able to secure through an existing relationship,” said Hulick. “We will continue to build scale in targeted markets within the state with a goal of increasing our holdings to approximately 1,000 units.”
Built in 1997, the property, which will be rebranded as Summit at Layton, is made up almost entirely of three-bedroom townhome-style units. DB Capital plans a capital improvement program that will enhance the building exterior, unit interiors and community amenities.
About DB Capital Management DB Capital Management (http://www.dbcap.com) is a vertically integrated real estate investment group based in Playa Vista, CA. DB Capital Management focuses on owning and operating quality multifamily properties in strategically targeted submarkets across the United States.
The DB Capital Management strategy revolves around a hands-on approach to acquisitions and asset management, coupled with an extensive understanding of each target investment submarket, which leads to maximum revenue generation and subsequent value.
Source:
Salt Lake City — Multifamily investment firm DB Capital Management (“DB Capital”) continues its investment activities in Utah with the acquisition of Spring Hollow, an 88-unit apartment complex in Millcreek, UT, an affluent suburb of Salt Lake City.
The acquisition of Spring Hollow caps approximately $100 million of transaction activity for DB Capital in Salt Lake City over the past 12 months. Its third acquisition during that period, the firm also exited five investments, some of which date back to when the firm entered the market in 2018.
Millcreek is located less than 15 minutes from Downtown Salt Lake City to the north and less than 30 minutes from the Silicon Slopes to the south, two of the most important employment hubs across the Wasatch Front. Served by the nearby UTA Trax Murray North Station, which provides access throughout the Salt Lake City Metro, Provo, and Ogden, Spring Hollow is within close proximity to entertainment areas such as Commons at Sugar House and Fashion Place Mall. It is also is within 30 minutes of five of the most popular ski resorts in Utah.
DB Capital plans an extensive renovation of the entire community which has largely remained untouched since it was constructed in 1973. Improvements will exceed $40,000/unit and include replacement of cedar shingle mansard roofs, new exterior paint, the addition of a brand new leasing office, a large indoor/outdoor fitness center, basketball court, dog park, and an activated courtyard area with games and seating situated around new fire pit and BBQ areas. Each of the community’s 88 two-bedroom, one-bath units will be updated as units become available with quartz countertops, stainless steel appliances, in-unit washer/dryer, new plumbing and lighting fixtures, and new cabinets.
“Salt Lake City was one of the first markets we invested in as a company and we seem to have found a great niche in these types of middle-market opportunities,” says Devin Antin, managing partner of DB Capital. “The Salt Lake City multifamily market is one of the most, if not the most, fundamentally sound in the United States with strong population and job growth and was our best performing market throughout the pandemic. We have a great reputation as a closer in this market and we were lucky to be in a position to make a pre-emptive strike on this deal. The relationships we have built over years of activity have put us in a position to do well long-term and continue to grow our platform in Salt Lake City.”
The multifamily market in Salt Lake City continues to thrive, as it saw a 2.4 percent rent increase in 2020 in spite of the emergence of the Covid pandemic, compared to many other metro areas which experienced flat or negative rent growth during the same period, according to Darren Hulick, Regional VP in charge of overseeing DB Capital’s market presence in Salt Lake City, Denver, and Portland.
“Given the property’s park-like setting nestled directly up against Big Cottonwood Creek, it will be attractive to renters looking to escape the higher density podium developments that make up a majority of the new options for renters,” says Hulick. “With Salt Lake City’s supply growth having a heavy concentration in high-density projects in the urban core, coupled with rising land and construction costs, we see tremendous opportunity in acquiring low-density garden-style assets at a significant discount to replacement cost and improving them to a point that their rents can draft off more costly new construction.”
The property was 98 percent occupied at the time of closing and DB Capital expects the renovation timeline to take approximately 16 months to complete.
Jason Wadsworth of Wadsworth Multifamily represented both buyer and seller in the transaction. Additionally, Arbor Realty Trust provided the first trust deed which was arranged by Marc Belsky of Marc Belsky Ltd.
About DB Capital Management
DB Capital Management (http://www.dbcap.com) is a vertically integrated real estate investment group with over $400MM in AUM based in Playa Vista, CA. DB Capital Management focuses on owning and operating multifamily property in strategically targeted submarkets across the United States. The DB Capital Management strategy revolves around a hands-on approach to acquisitions and asset management, coupled with an extensive understanding of each target investment submarket, which leads to maximum revenue generation and subsequent value.
Source:
DB Capital Management (“DB Cap”) has acquired Apex on the Highline (“Apex”), a 138-unit multifamily property in Aurora, for $31 million, according to a press release from the multifamily investment firm. DB Capital plans to substantially renovate the property, which was built in 1984, to make it more competitive with other properties in Aurora.
The acquisition of Apex furthers DB Cap’s goal of building a local portfolio of 1,000 units by the end of 2022. The firm entered the market in October 2020 with the acquisition of Red Owl Apartments for $16.2 million.
“We see significant opportunity in the suburban submarkets and plan to aggressively pursue acquisitions to further grow economies of scale and establish a foothold in the Denver market. We like to target deals that fly just under the institutional radar where we feel like assets are not always priced to perfection,” said CEO and Co-Founder Brennen Degner. “This allows us to find great opportunities, deliver above market returns to our investors and still build scale quickly which allows for optimal operational efficiencies.”
Aurora continues to benefit from the migration of renters to the suburbs in search of less expensive housing options. The average asking rent in Aurora is approximately 12 percent below the Denver metro average, which continues to attract renters and drive down vacancy rates in the submarket. Apex was 99 percent occupied at closing.
Apex, located at 15597 E. Ford Circle, backs up to the Highline Canal Trail, suburban Denver’s most popular walking/running/biking trail that runs 71 miles from Waterton Canyon in Highlands Ranch to Green Valley Ranch in Denver. Additionally, Apex is less than a mile from the Town Center at Aurora with more than one million square feet of shopping and dining venues. Served by Denver’s RTD Light Rail System and with access to Interstates 225 and 70, area residents can commute to several of Denver’s largest employment hubs, including the Denver Tech Center, Fitzsimons Life Science District, Downtown Denver and Denver International Airport.
Planned renovations will primarily be centered on the exterior, including new exterior paint, modernized fitness center and an upgraded pool and deck area. In addition, the company will add a basketball court, courtyard area, package lockers, and refurbished landscaping to the property. Interior renovations will include new wood plank flooring, cabinetry, new hardware, countertops, plumbing and lighting fixtures, bathroom upgrades, as well as installing washers and dryers in the remaining 28 units.
“While the property had been well maintained by the seller, we believe we can create value by enhancing curb appeal, modernizing property amenities and improving the renter experience which will drive prospective renter volume and tenant satisfaction,” added DB Capital Regional Vice President Darren Hulick, who is responsible for acquisitions and asset management in the Denver market.