Despite Significant Challenges, Multifamily Pricing Holds in Denver

This month, when Oak Coast Properties sold the Pembrooke on the Green Apartments in Denver for $163 million, it revealed pricing confidence in the market. While many investors have been expecting and awaiting a price reduction in multifamily, Phil Nahas of Oak Coast says that the pricing reduction has yet to come, and the firm has been an active buyer in the Denver market.

“Today, I am not seeing discounts on pricing. I see people underwriting delinquencies with those delinquencies tapering off over time, but I haven’t seen a significant dip in pricing expectations, as many people have been anticipating,” Nahas, managing partner at Oak Coast, tells GlobeSt.com.

This isn’t to say that multifamily hasn’t been impacted by the pandemic. Many of the current economic fundamentals have severely impacted the apartment market. “Multifamily has had significant challenges,” says Nahas. “There was a huge spike in unemployment, a concern that people weren’t going to be paying their rent and a concern that businesses weren’t reopening, creating more uncertainty around jobs. So far, we have seen some delinquencies, but people are still paying their rent for the most part. Multifamily has really held up pretty well, especially when you are comparing it to retail or hospitality. There are also still investors seeking yield and safe assets.”

Despite the hardships facing multifamily and the lack of a COVID-discount, Oak Coast is still an active buyer, and the firm has continue to raise capital for new acquisitions, showing investor confidence as well. “We are still really active. We recently opened escrow on a new deal and trying to acquire another deal. We have investors that want to put capital to work and generate yield in an asset class that has been pretty resilient,” says Nahas. “Our capital raises are very quick, and capital raising for us during the pandemic has not been an issue. With exits like this, there is capital that investors want to redeploy. That is why we are actively acquiring and looking for new opportunities.”

So far, Oak Coast also hasn’t changed its acquisition strategy during the pandemic. “We are looking at all value-add, core-plus assets. We are looking for existing assets that have cash flow where we can come in and improve the cash flow through improved amenity sets, better property management or one or a combination of those three,” says Nahas. “Starting off with cash flow from day one is important for our investors. Denver has been a great market for us, and we believe in Denver long term. That is where we are acquiring right now.”