Though their company is based near the ocean, the executives at Plenty of Places Apartment Homes seem to be fans of the mountains.
Since its founding almost 20 years ago, the Long Beach, California-based private apartment owner has made 13 acquisitions in the Denver metro area. Its latest purchase came last month when Plenty of Places acquired Highland Junction, a 39-unit property in the Berkeley neighborhood.
“It has got the best of both worlds for Denver,” Michael McClearn, acquisitions manager and operations coordinator, told Multifamily Dive. “It has the red-brick historical charm from some of the single-family homes in that area mixed in with convenient access to supermarkets, retail, restaurants and nightlife.”
Acquisitions are slow in Denver, with only 14 properties totaling 750 units and $240 million selling in August, according to Toronto-based professional services and investment management company Colliers. But in acquiring Highland Junction, Plenty of Places was able to secure what it saw as a valuable investment opportunity with an existing loan, according to McClearn.
“This property really benefited from some advantageous assumable debt,” McClearn said. “We got it with a sub-four interest rate and had a significant seven-year term remaining on the note.”
The three-story elevator-equipped building offers a mix of studio and one- and two-bedroom units. Apartments include washer and dryer units, dishwashers and microwaves.
Plenty of Places has a nearby garden-style property, which makes Highland Junction even more attractive. “We've got the ability to leverage our existing in-house property management team over at Kipling Village,” he said. “So we're able to identify some considerable operational upside, both in bringing rents to par with the market and just controlling expenses.”
Typically, Plenty of Places seeks value-add properties built in the 1960s and 1970s. However, the market is shifting and the firm doesn’t see as many opportunities to buy and renovate older properties with rent growth slowing.
“We're looking more toward newer, more turnkey [acquisitions], realizing that now is not the time to focus on traditional value-add multifamily,” McClearn said. “You've got rent growth slowing down, interest rates going up and sales prices softening. We're not seeing the same kind of returns on traditional value-add.”
Instead, there are opportunities to acquire newer properties near urban job centers, like Highland Junction, which was built in 2018. With a portfolio of more than 2,400 units in Colorado, California and Nevada, the firm is focused on acquiring those more modern multifamily properties.
“With the slew of oncoming supply that you're seeing in some of these major metros, residents are really going to start shifting their preferences toward those buildings that are more well located and better amenitized,” McClearn said. “In Colorado, we're looking at about 30,000 units under construction coming down in the pipeline. And a lot of those are concentrated in the downtown Denver submarkets. In those particular areas, just buying quality assets is going to be a safe bet going forward from here.”
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