Outside investors flood into market

A lot Northern Colorado residents feel it’s a great place to live and work and now a growing number of national players appear to agree, spending close to $150 million in real estate deals since the beginning of the year.

The list of projects and investments bankrolled by companies from out of the market, or even out of state, is a long one, and Northern Colorado is only getting more attractive to the outside investor, according to Steve Kawulok of Sperry Van Ness.

“Fort Collins in particular is in the national spotlight,” Kawulok told a recent gathering of the Northern Colorado chapter of Commercial Real Estate Women.

Real estate investment as a whole has increased following the recession, according to Rhys Christensen, broker and partner at Realtec Commercial.

Real estate nowadays is seen as a more stable investment with better returns than more traditional forms of investment, like certificates of deposit or Treasury bonds. Given today’s low interest rates, investing in real estate can provide a return of 7 to 10 percent, Christensen said, compared with lower returns from other forms of investment, which can be as low as 1 to 3 percent.

The Northern Colorado market has grown more attractive to national investors because of its size and the strength of its economy, Christensen said. Many national investors that might have looked at markets as large as Denver or even New York are now considering “tertiary” markets like Northern Colorado.

“There’s a lot of competition in major markets for quality assets,” Christensen said. Northern Colorado, he said, is in a bit of a sweet spot because it offers those quality assets but without the hassle or higher prices that come with larger markets.

Christensen defines a tertiary market as one with between 50,000 and 250,000 residents.

The economy here is also seen as a stable one because of unemployment rates that are lower than in other parts of the country. The unemployment rate in Fort Collins is 6 percent, well below the national rate of 7.8 percent.

The Northern Colorado economy continues to recover more quickly than the rest of the country in part because it weathered the recession better, according to Betsey Hale, economic development director for the City of Loveland.

In addition, the area does not rely on just one sector or another for employment.

“We have a diversity of economy,” Hale said. “These companies from other areas look at our area and say, ‘Here we have a region of our country that’s not totally dependent on one sector.'”

The region is home to jobs in health care, education, energy, technology and more, Hale said, so “we’re able to hold our own.”

“Even though Vestas and others may be downsizing, other companies are hiring,” Hale added. “As a region, we need to put that in perspective. There are hundreds of job openings right now.”

Specifically, Hale mentioned continued hiring at companies like Leprino in Greeley, and Woodward’s possible expansion plans in Fort Collins.

The area’s low vacancy rates are also attractive to investors who might be looking to get involved in multi-family properties, Hale said.

Indeed, the Eagle Ridge Apartments in Loveland are one of the area’s most recent purchases. According to Larimer County public records, the multi-family complex was purchased by New Jersey-based Raia Properties for $23.5 million in August.

The 168-apartment Eagle Ridge features rents and amenities that are attractive to professionals with relatively high, steady income. This type of stable tenant is attractive to an investor, as is Eagle Ridge’s location in Centerra, one of the fastest-growing areas in Northern Colorado.

According to its website, Raia Properties specializes in multi-family investments and owns and manages a portfolio of 2 million square feet. The company also owns a property in Colorado Springs.

The Eagle Ridge sale demonstrates a bit of diversity in the type of investment being made here, but the majority of these investments are in the retail sector, and Realtec’s Christensen doesn’t see this changing any time soon.

Investors typically specialize in one type of property, he said, so those that have already entered the market by purchasing retail space are likely to keep purchasing retail if they decide to expand their portfolios here.

A good example: AmCap, the Stamford, Conn.-based owner of University Center, a retail strip near College Avenue and Drake Road, recently purchased Harmony Marketplace.

AmCap’s experience in Fort Collins has been positive enough that the company chose to spend $58 million on Harmony Marketplace, which is anchored by tenants like King Soopers and Home Depot.

Beyond that, Northern Colorado has more investment-grade retail properties than other types of commercial real estate such as industrial or office.

“The primary focus here probably will always be retail,” Christensen said.

Molly Armbrister covers real estate, banking and health care for the Northern Colorado Business Report. She can be reached at 970-232-3139, marmbrister@ncbr.com or twitter.com/MArmbristerNCBR
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