A Utah investment firm is expanding its stake in one of Denver's fastest-growing neighborhoods with a deal nearly identical to one it closed several years ago.
Peak Capital Partners bought Momentum at First Creek, a 200-unit apartment complex located near Denver International Airport and next door to Connect at First Creek, a property it bought in 2022. Both deals involved Massimino Development, a locally based seller and the original developer of both multifamily properties.
Peak's $56 million purchase of Momentum at First Creek gives the Utah firm six multifamily properties in Colorado, including 150 units near one of the Denver region's arterial corridors.
Construction on the six-building Momentum complex at 17700 E. 56th Ave. wrapped up in late 2022, just a few months after Peak acquired the neighboring Connect property at 17900 E. 56th Ave. for $62.5 million.
While the East 56th Avenue deals are near replicas, the time lapsed between their respective closings underscores their primary difference: pricing.
Same, but different
Back when Peak scooped up the Connect property, Denver's multifamily market was in the midst of a historic construction boom.
Developers such as Massimino were flooding Denver's multifamily market with thousands of units to capitalize on the region's pandemic-induced population spike. By early 2024, a pipeline accounting for 12% of the region's total inventory was under construction, according to CoStar data. More than 12,000 units have been completed over the past year alone.
The region has since been struggling to keep up with that growth, leading to softening in rents and property valuations as property owners now face stiff competition.
While the cost of capital and supply concerns have slowed the pace of new multifamily groundbreakings, more than 10,000 units are still underway. That has added another layer of challenge for landlords scrambling to lease up their properties. Average rents in the Denver area have fallen by 3.3% over the past year, according to the data, and landlords have increasingly turned to concessions in order to attract and retain tenants.
All of that has created an unappetizing stew for buyers already contending with high borrowing costs and flat rent-growth projections.
Yet despite the near-term challenges, investors such as Peak are pointing to the slowing construction pipeline and the market's strong economic backbone as indicators that Denver is still worth the bet — especially for bargain deals in fast-growing residential pockets.
The firm paid $280,000 a unit in its latest deal for Momentum, far below the more than $416,665 it paid for Connect nearly four years ago. Combined, the two complexes tout an average vacancy rate of about 5.6%, according to CoStar data, a healthy position compared to the market average of 12%.
That's a testament to the increasing demand sprouting around Denver International Airport, which has emerged as a popular hot spot in recent years for its access to major thoroughfares, relative affordability and strong employment growth. Since hitting a historic peak in mid-2022, groundbreakings have fallen to decade lows, right as demand begins to outpace new supply.
And with vacancy rates expected to trend down through the remainder of the year, Peak's second time around the East 56th Avenue block appears to be particularly well timed.