Oak Coast Closes Denver’s Biggest Deal So Far This Year

Oak Coast Properties has closed one of the largest transactions year-to-date in the Denver market. The firm has sold the 959-unit Pembrooke on the Green Apartments in Denver for $163 million, following the completion of its value-add business plan. The firm purchased the asset in 2019, and invested $1.9 million in renovations.

“We were looking at selling this deal pre COVID, and we were out in the market and negotiating. Once COVID happened, we took a little break,” Phil Nahas, managing partner with Oak Coast Properties, tells GlobeSt.com. “Ultimately, we decided to re-engage with the buyer. We did hit our business plan, and we were looking at a really solid return for our investors. When we purchased the property three years ago, we place 10-year fixed-rate debt on the property with five-year interest only. So, we saw an interest-only period that was expiring and decided to take some chips off of the table and redeploy the capital into some other opportunities. So, the timing lined up well.”

During the pandemic, many owners have removed properties from the market to wait out the downturn; however Oak Coast was able to secure strong pricing for this property and ultimately meet its investment goals. “Some people pulled properties right after COVID, and the thought was to revisit it a year later,” says Nahas. “However, where we ended up on the exit price of this asset, it was still a really strong exit for us that made sense. With that, we have seen some additional buying opportunities this year.” When Oak Coast decided to sell, the firm reconnected with buyers that had already engaged in the negotiation process before the pandemic.

The transaction, of course, still saw an impact from the market change. The property had some challenges with rent collections through the pandemic, like most apartment assets. “Every property has struggled with rent collections, and every property is running a different delinquency,” says Nahas. “This property actually held up pretty well, especially given the side of the asset. This was really part of the underwriting for the buyer and where they see rent collections going in the long term and what value do they put the home at today.”

As a result, there was a nominal discount in pricing compared to pre-pandemic expectations. The reduction was not significant enough to derail the deal. “We had an expectation on pricing pre-COVD, and the price we got was slightly below where we were pre-COVID,” says Nahas. “We were 2% to 2.5% below what we were expecting pre-COVID, but based on where we bought this three-and-a-half years ago and the solution for the capital on the backside of this transaction, it still made all of the sense in the world for us to sell at that price.”