National multifamily investor Equity Residential has yet to shy away from big-ticket purchases as it aims to expand its vast portfolio with properties scattered among high-growth markets.
The Chicago-based firm broke pricing records for its latest purchase on the outskirts of Denver, a sign that the investor is looking beyond mounting economic challenges in order to stretch its stake in cities and suburbs across the United States that have experienced rising renter demand.
Equity’s $108 million purchase of the Savanna Nine Mile apartment complex in Lafayette, Colorado, is the highest price ever paid in the city’s transactional history for a multifamily property, according to CoStar data. The deal with seller Evergreen Development Co. — which completed construction on the 287-unit complex last year — closed in late April.
The price tag for the property at 2870 Arapahoe Road shakes out to more than $307,300 per unit, one of the highest per-unit prices ever paid for an apartment complex in the city.
A growing pool of previously active investors across the country have been spooked by a confluence of macroeconomic factors that have halted deals and has resulted in a slowing sales environment. Even with concerns such as a challenged financial climate, rising inflation, a potential recession and widespread layoffs, some firms are betting the issues will be short term and instead are focused on regions with underlying demographics expected to withstand any temporary hurdles.
Located about 30 minutes north of downtown Denver, Lafayette and the greater Boulder, Colorado, area has benefited from rising rents and strong employment growth in recent years. A burgeoning tech scene, strong demand from student renters and supply constraints have helped push rental rates by more than 35% higher in the past decade, according to CoStar analysis.
A typical apartment unit in the region rents for nearly $2,000 a month, or roughly 20% above the national average. What’s more, renters from expensive coastal markets such as San Francisco have flocked to the area in recent years given its comparable affordability.
Since the start of the pandemic in early 2020, Equity Residential has spent hundreds of millions of dollars to acquire multifamily properties in Colorado, Washington, California, Virginia, Georgia, Texas and Massachusetts. The investment firm reported a more than 9% increase in revenue for the quarter ending March 30 compared to the same period last year, with Equity CEO Mark Parrell attributing the performance to strong demand and higher lease rates.
It “exceeded our expectations,” Parrell recently told analysts of the firm’s results. “Our business continues to benefit from durable employment in our affluent renter demographic and limited competition from both new apartment supply and single-family home ownership.”
The company owns more than 79,350 apartment units across upwards of 300 properties, all of which tout an average rental rate of about $2,975. Eight of those properties are in the greater Denver area, which Equity Residential classifies as one of its “expansion markets.”