If you want proof that value-add apartment communities continue to be hot investment properties in the Denver area, look no further than the recent sale of the Grove at City Center in Aurora.
Wood Partners paid $60 million for the 3-story, 420-unit community at 14304 E. Tennessee Ave.
“The Grove at City Center is a strong value-add opportunity that we are thrilled to add to our growing portfolio in the greater Denver area,” said Jane Maushardt, Wood Partners’ Director of Acquisitions.
“The Grove is an excellent example of Wood Partners’ strategic approach to identifying well-located, value-add opportunities in growing regions that appeal to a wide variety of our target renters,” she added.
That point of view was shared by the 20 or so competitors that Wood outbid for the 35-building property built in 1982.
“This was a huge value add opportunity,” said Pat Stucker of JLL, who with his partner, Ray White, brokered the sale.
The seller was Kennedy-Wilson Holdings Inc., which is based in Beverly Hills and has a market cap of about $1.9 billion. Records show that Kennedy-Wilson paid $39.75 million, or $94,643 per unit, for the property in June 2013. By contrast, Wood Partners paid the equivalent of $142,857 per door.
“That’s a 50.94 percent increase in value, or roughly 1.38 percent growth rate per month,” noted John Winslow, principal of Winslow Property Consultants LLC.
Winslow was not involved in the sale, but closely tracks the Denver-area real estate market.
Kennedy-Wilson’s gross profit, less selling and closing costs, was $20.25 million.
“That computes to $675,000 per month,” Winslow pointed out.
Wood Partners assumed a $31.6 million note with a 4.27 percent interest rate, as part of the purchase of the Grove, Winslow’s research shows.
However, it wasn’t pure profit as Kennedy-Wilson invested about $11 million into capital improvements to the community.
But plenty of value-add opportunities remain.
“With much of the heavy lifting done, (Wood Partners) can focus their investment on capital expenditures that result direct rental increases,” according to JLL’s research.
The 48 units that Kennedy-Wilson upgraded resulted in rent premiums of $200 to $275 per month.
“Through thoughtful design, capital improvements and sound property management, we look forward to bringing this well-positioned asset to its full potential to meet the level of other similar assets in the submarket and achieve our strategic investment goals,” said Maushardt of Wood Partners.
Wood Partners and other prospective buyers liked the location of the Grove, in addition to its value-add appeal, Stucker said.
“it is right off East Mississippi, a half-mile from I-225,” Stucker said.
The Grove also is less than a half-mile from the Aurora Metro Center light rail station that will open later this year.
The 10.5 mile I-225 Rail Line will function as Aurora’s “Main Street,” Wood Partners said.
Aso, the Grove is 20 miles east of downtown Denver and close to major employment centers, including the Denver Tech Center, the Anschutz Medical Campus, Fitzsimons Innovation District and the Denver International Airport.
