John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... 
About 15 investors are buying apartment communities owned by Carmel Cos., including this one in Dove Valley.
Between now and the end of the year, multiple investors are expected to close on the purchase of the Denver-area apartment portfolio being sold by Carmel Cos.
The sale of the apartments is expected to be the nation’s largest multifamily deal this year.
Earlier this year, InsideRealEstateNews reported that the entire portfolio is being listed by $967.4 million. The portfolio had been broken into two pieces. The largest piece included 22 properties and is listed at $902 million and the smaller piece included another five to seven communities. Together, they include more than 8,000 units.
The empire was built by the Kal Zeff, who died more than six years ago. The portfolio is being sold by his children – Ron, Diana, Michael and Dana. Ron Zeff is an apartment mogul in his own right, having built a separate company, San Francisco-based Carmel Partners, which buys and sells apartment across the country.
The properties are being listed and marketed by the CBRE Group Inc. CBRE has received more than 400 confidentiality agreements – double what is typical – and about 50 groups submitted bids.
“The word on the street is there are about 15 different buyers on all of the assets,” said Jeff Hawks, principal of the Denver office of Apartment Realty Advisors. Hawks is not involved in the deal, but follows the apartment market closely, and knows many of the groups interested in buying the portfolio.
The price of the deal is not being released.
$850 million deal?
Hawks estimates that the final price will be in the $825 million to $850 million range. He is aware of one buyer who offered about $800 million for the entire portfolio, and was turned down.
“I believe there are several people who are only going to buy one property,” Hawks said. “Some people will make a “one-off” purchase, allowing them to own the building they want in a specific submarket. I’m guessing the most any single buyer will purchase is five or six buildings.”
The apartment communities are known as “Class-B” properties, which are older buildings that often do not have the latest amenities, such as athletic clubs that rival private ones and elaborate media rooms. Monthly rents range from $720 to $1,870. The median monthly rent in the Denver area is about $863.
“Their newest properties are more than 10 years old,” Hawks said. “That means that REITS (Real Estate Investment Trusts) won’t be buyers. REITs tend to want newer properties. Many REITS have sold their older properties to raise cash to buy or develop newer ones, which have amenities that you would find in resorts and high-end homes.”
However, there are plenty of other buyers, especially in a market like today’s, when fundamentals are so strong.
Stars aligned for selling apartments
“The good news for them is that interest rates, already low, have come down since they began marketing them,” last June, Hawks said. “And rental income has gone up. The market is moving in their direction. It truly is a perfect time to being selling apartments.”
In addition to private buyers looking for one-off deals, buyers are almost certainly to include, “very, very big institutions and and real estate advisors funds,” Hawks said. “The typical buyer will be a national investment partnership – someone like a Ron Zeff, for that matter. Ron is a private guy who buys and sells properties, but big institutions trust him with their money to find good deals.”
Such partnerships are funded by pension funds, high net-worth individuals, insurance companies and other institutional sources, he said.
In a market such as this, it is the seller, not the buyer who holds all of the cards. In other words, it is just the opposite of the home sales market.
Without addressing the Carmel portfolio specifically, Hawks said sellers find little need to compromise on price.
“At this time in the market cycle, if you have a buyer who has a property under contract, but hasn’t closed yet, and tries to negotiate a lower price, the seller typically will go to buyers No. 2 and buyer No. 3,” Hawks said.
Contact John Rebchook at JRCHOOK@gmail.com
