Dive Brief:
- The Fairways at Lowry, a 450-unit workforce apartment property in Aurora, Colorado, was transferred to special servicing after its owner failed to make August and September payments. The property had a $52.4 million floating-rate loan from Freddie Mac, according to a Morningstar Credit report shared with Multifamily Dive.
- The asset was bought by San Diego-area Tower 16 Capital Partners in conjunction with New York City-based Dune Real Estate Partners in November 2020 for $68.5 million, according to a news release and local property records. Tower 16 didn’t respond to Multifamily Dive’s request for comment.
- The Fairways at Lowry was Tower 16’s first purchase in Denver, though the company planned to acquire a portfolio of 2,000 units over the next 18 months. It currently has no Denver-area properties listed on its site, although it has a number of assets in Las Vegas, Phoenix and the Inland Empire in the greater Los Angeles area.
Dive Insight:
The Fairways at Lowry sits just minutes away from the Lowry master-planned development and dining, shopping and recreation amenities, according to Tower 16’s press release. In addition, the property is 3 miles from Interstate 225 and 7 miles from downtown Denver.
At the time it purchased the property, Tower planned $6.8 million in renovations, including modernized apartment unit upgrades, a new clubhouse, a gym and an updated pool area. The company also intended to add outdoor amenities, including barbeques, seating, outdoor gaming and a sports court.
There was no update on those upgrades in the Morningstar report. However, the borrower went through “a fairly aggressive eviction process early in 2024 in an attempt to elevate the level of tenancy,” which resulted in lower occupancy and higher turnover expenses, according to Morningstar.
Insurance expenses had risen 68% from the underwritten figure, according to Morningstar. As financing and other costs have risen, rents in the Denver area have fallen due to the high supply of apartments.
In its most recent Vacancy & Rent Report for July, the Apartment Association of Metro Denver reported that average rents had decreased by 3.7% year over year. Rental rates were down $71 since the second quarter of 2024 and $46 lower than the same period in 2023.
For owners who had planned extensive property improvements to capture increased rent, the market trajectory is bad news.
“For three consecutive quarters now, we have seen rents lower than they were at the same time the year before,” Mark Williams, AAMD executive vice president, said in a news release. “We are starting to see a trend here. Average rent continues to stay relatively flat the past three years.”
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