Maintaining Market Share With Rehab and Renovation

Last month in our newsletter we talked about how Denver is in the midst of a boom. U.S. News ranked Denver #2 in the 100 best places to live in the US. A report that analyzed employment trends in the nation's 100 largest cities, also ranked Denver second in the nation for job seekers. The local multifamily housing market hasn't hesitated to take advantage of Denver's reputation.

Over 80 new projects were completed in the last 5 years. 25,000 units are currently under construction and will be completed this year with 3,246 new apartments already delivered in the first quarter. In a typical market, that might push vacancies up and drive rents down, however Denver isn't a typical market and properties like Dakota Ridge, a Berkshire Community located in Littleton, CO. know this.   Despite increases in inventory, rents are up. In March, metro Denver rental rates were 3.2 percent higher than last year. This exceeds the national average of 2.4 percent. Unincorporated Arapahoe County, Littleton and South Lakewood were among several other areas that saw increases at 5% and more. Given the market, existing projects need to look at ways to compete and hold their market share. And that's exactly what Dakota Ridge, a Berkshire Community located in Littleton CO, has done.

Stonebridge Builders has been fortunate to work with Berkshire Communities on several multifamily renovation and rehab projects. Their current project, the ongoing renovation of 480 units at Dakota Ridge, is a true partnership, with top to bottom oversight from Stonebridge and consistent timely feedback from Dakota Ridge.   Property manager, Kelsey Carter explained that in order to justify rent increases, maintain their share of the market and compete with other complexes, they needed to update the look and feel of their units as well as improve function and efficiency.   Based on market research, Dakota Ridge was anticipating adding an average rent premium of $65 - $225 based on the number of bedrooms in the unit. With the project a third of the way complete, a premium has been added to the rent for renovated apartments, however it exceeds their projections by as much as 37% in some cases.  

Dakota Ridge deliberately chose specific upgrades based on industry and market trends as well as feedback from residents and prospects. Certain upgrades were selected more for aesthetic purpose. For example, outdated bar level counter tops were replaced with single level surfaces to align with more desirable current kitchen design features. Other upgrades were chosen for improved function, durability and reduced maintenance long term, in addition to appearance. Vinyl blinds were replaced with 2-inch wood blinds. According to Carter, resident misuse has a greater impact on vinyl blinds and from the outside looking in aged vinyl blinds give a dated, unpolished look and feel. Replacing them with wood reduces maintenance costs, extends the life of the product and provides a more cohesive appearance between the interior and exterior.   In first floor units, plank hardwood flooring was installed to replace carpet and vinyl. According to a survey done by Multifamily Executive's Concept Community, the current renter wants hardwood flooring over carpet and they are willing to pay extra for it. Aware of this trend, Dakota Ridge believed they could achieve an additional rent premium of $15-40 for first floor units with plank hardwood over second and third floor units where it is not yet an option.  Given market conditions, on average they were actually able to achieve premiums 40-75% higher than projected.  

Choosing the right builder is one of the most critical components when undergoing a major renovation project. Berkshire Communities chose Stonebridge Builders for the Dakota Ridge rehabilitation project based on a long standing relationship and proven track record of success on previous projects.   About Stonebridge, Carter says that the main thing that sets them apart from other builders is how they handle situations with unexpected outcomes. Even with a perfect plan, things can still go awry. She explains, "Stonebridge works to make things right rather than placing blame where things went wrong. They are solution focused versus situation focused. Stonebridge's attitude is, it doesn't matter how it happened or who's fault it is, it's about how are we going to make it right."  

Stonebridge's President and CEO, Chris Tolar, says, "Our client relationships are equally as important as the quality of our work. Communication is paramount to the success of any project and we make that our number one priority from our first contact with the client, throughout construction and long after the completion of the project. That's how we do business."  

As an industry expert and leader, Stonebridge is the natural choice for any multifamily community or apartment renovation and rehabilitation. Contact us for industry insights, planning and execution of your next project. 

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The Benefit of Unit-by-Unit Renovations vs. Major Overhauls of Apartment Complexes and Multifamily Communities

Regardless of the size of the property, whether it is luxury or affordable, urban or rural, property owners are concerned about the same things, property value and profitability. Maximizing rental income and keeping expenses low are the top priorities. When the Net Operating Income (NOI = Income minus Expenses) on a Multi-Family property increases, so does the overall property value.

Metro Denver has one of the most competitive rental markets in the country. Demand is high and supply is low. Last year inventory added by new construction was absorbed without increasing vacancy rates, in fact, vacancy rates decreased by over 1%. At the same time, apartment rents grew by 2.9%, which is slightly faster than the overall inflation rate.

To keep up with the competition and capitalize on current market opportunities, property owners need to justify rent bumps while keeping expenses and vacancy rates low. Individual unit renovations and rehabilitation of the property are the main factors in generating and justifying rent increases.

For most property owners, a complete rehab of the entire property is cost prohibitive and not feasible. However, opting for unit-by-unit renovations as apartments become vacant softens the financial burden of a complete overhaul while keeping occupancy and rental income stable.

Stonebridge Builders, a Colorado-owned and operated commercial construction company, has perfected unit-by-unit apartment rehabilitation and has made this a top priority in their business model. For all projects, the scope of work and timeframe for completion is determined by allocated budgets and projected lease turnover.

Stonebridge understands local market conditions and works diligently with property owners to ensure that unit availability and quick turnaround are maximized while costs and income loss remain low. Currently, on a larger scale, Stonebridge is renovating 600 units over a 2-year period for a large multifamily community in Superior, CO and completing 55 units over 12 months for a smaller Denver metro apartment complex. When Stonebridge recently completed turn key renovations for an apartment complex in Littleton, each unit was completed in 10 days or less, maximizing unit availability and minimizing rent loss.

Successful unit-by-unit apartment renovations and value-add projects require planning, preparation and careful oversight and management of the project. When tenant occupancy is high, exterior improvements like new siding, stamped concrete, designer patio finishes, parking lot re-paving and landscaping can supplement a lower volume of interior renovations of kitchens, baths, plumbing and lighting, new paint and flooring.  

To create a strategic plan and partnership to renovate an Apartment Complex or Multi-Family Community, call us. 20 years of experience in the industry, a portfolio of successful outcomes and our commitment to providing the absolute best customer service will ensure an outstanding experience from start to finish.

The Time is Right for Multifamily Renovations and Apartment Remodeling

 In 2015, Denver ranked 6th in the country for Top 10 cities adding jobs. This trend has continued into 2016 with growth rates of 3 to 4 percent per year. With more jobs available, Denver became one of the fastest growing cities in the nation. Last year, Denver’s population grew by 102,000, however according to the U.S. Census Bureau, the state added only 25,143 new homes, condos and apartments to accommodate those newcomers, adding 15,000 units to a shortfall that has been mounting since 2012. Colorado is currently at 55,000 homes short of where it needs to be to support the recent population growth.

With increased demand for housing, and a decrease in supply, rent growth is the natural consequence. In 2014, rent increase averaged 5.9% nationwide, this year it has been as high as 9% in markets like Denver, San Francisco and Portland. Despite higher rents, vacancy rates are low.

The conditions are perfect for investing in multi family housing. With the increased need for multi family housing also comes a greater need for Denver apartment renovations and Denver apartment remodeling for current property owners. Local commercial construction company, Stonebridge Builders, has been in business of Multifamily remodeling and Multifamily renovations and new construction for over 15 years. When considering a new purchase of a multi-family property or renovating an existing one, or a build from the ground up, contact Stonebridge Builders, the number one Denver commercial construction company, the top expert Multifamily renovations and Apartment remodeling.

Is there a housing plateau coming for metro-Denver?

It’s news to no one that the Denver Real Estate market is at an all time high. It’s on fire right now and doesn’t show signs of slowing down any time soon. Or does it?

According to the Denver Metro Association of Realtors market trends report, in June, for the entire residential market of single-family homes and condos, there was an 8% increase, $25,600, in the median home price over last year. In the last month alone, median sold home prices increased 1.39% from the previous month.   Inventory is up with active listings 24.4% higher than last month and 9.67% over last year at the same time, with sellers trying to capitalize on rising prices and low interest rates.  We’ve seen annual appreciation gains in the double digits for 3 years in a row, with single-family home and condo prices up an average of 10.74% and 12.38% respectively for average sold prices. Across the board, total sales volume is $10.17 billion year to date (up 7.21% compared to 2015).

However, some analysts are claiming that we will soon begin to see signs of a much needed market correction and are predicting a plateau in the near future, even as early as 2017. Mark Boud, chief economist at Real Estate Economics based in Orange County, Ca., predicts the 3 year run in double digit appreciation in metro-Denver home prices will begin to fall off in the second half of this year. He predicts meager price increases and then small decreases by the middle to end of 2016; 5.4% appreciation in metro-Denver median home prices this year and 2.8% in 2017 and 1.8% in 2018. He doesn’t predict a similar crash in the market to what we saw 2007-2009 when job losses drove a depressed market and a rise in foreclosures and distressed sales. Boud suggests that a leveling off or plateau will require a shift in our thinking that has grown accustomed to sharp increases in home prices and property values. Anthony Rael, the Chairman of the Denver Real Estate Market Trends Committee at the Denver Metro Association of Realtors, says, “if we get anything under 5 percent in appreciation, sellers will lose their mind and think the market is collapsing.”

So, why are experts predicting a shift? Why would home prices begin to level off and possibly even decline given recent trends and no clear indication or signs of slowing down? According to Real Estate Economics, the Denver market is shifting from one that has been under-valued and under-supplied to one that is over-valued but still undersupplied.  Home prices have finally reached the limits that metro-Denver income levels can support and new building and development will most likely not correct lack of supply.

This means that when interest rates increase from where they are currently in the mid-3’s, the lowest level in three years as the Federal Reserve reacts to Brexit (Source: Freddie Mac), to the mid-5’s, where they are predicted to reach in 2020, it will become more difficult to finance a home. Trends towards increased conservatism in mortgage lending and underwriting guidelines combined with the fact that builders have the strong memory of being badly burnt during the most recent housing crisis as well as being faced with more challenging obstacles to overcome with City and County development standards, indicates that the market may be even more vulnerable to a decrease in continued growth. Given these predictions, it seems wise to take the advice of Mark Boud and Anthony Rael. We collectively need to shift our thinking and expectation around continued sharp increases in metro-Denver home prices and prepare for a plateau on the horizon.  

2014 AAMD Trade Show

Good news for Denver Multifamily Clients: Denver Area Apartment Market Sets Records in 2012

Great news for our Denver multifamily clients is reported by Dennis Huspeni, Denver Business Journal:

 "The Denver-area apartment sales market was one of the nation's hottest in 2012, with a record $2.4B worth of apartment buildings sold.  Low interest rates on construction, purchase and development loans, as well as higher demand from renters helped fuel the push.  That's according to ARA Colorado, one fo the highest-volume multifamily brokerages here.  ARA brokers alone moved $1.1 billion worth of apartment assets in 62 sales representing 10,429 apartments."

Huspeni further writes "vacancy rates for Denver-area apartment buildings dwindled to 4.3 percent through the third quarter, according to the Colorado Division of Housing.  Average rents climbed almost 6 percent in that same period.  And interest rates have dropped to as low as 3 percent fixed, easing financing for apartment-building buys."

See the following link for the full article:

http://www.bizjournals.com/denver/print-edition/2013/01/04/apartment-market-sets-records-in-2012.html?page=all

Happy to Help Habitat

For the past 4 years, Stonebridge Builders has worked diligently to carefully preserve any usable appliances that are no longer needed by clients.  We have salvaged these appliances, and coordinated their donation to Habitat to Humanity, to be recycled and used by others.

We recently received the following letter from Habitat for Humanity, and these words are very meaningful to our team as we strive to give back to others in the community:

"Habitat for Humanity appreciates ALL the donations Stonebridge has provided to us...without you we could not continue our mission of building" - Cheri with Habitat for Humanity

We thank Cheri and her team members at Habitat for Humanity for such a successful partnership.

2011 AAMD Chili Cook-Off

This year's Apartment Association of Metro Denver (AAMD) Chili Cookoff was a good time had by all.  We were able to connect with many of our wonderful clients and vendor partners, and also spend time with our families.

Consistent with the Stonebridge Builders company mission, we take every opportunity to have fun.  To fully experience the Cookoff's Octoberfest theme, we dressed in full lederhosen and some of us even dressed as beer maids.  We hope that you enjoy the photos below, and that you can join us for our next event:

Stonebridge Earns State of Colorado Cost Containment Certification

Stonebridge Builders is pleased to announce its recent State of Colorado Department of Labor Cost Containment Program Certification.  In 1989, the Colorado state legislature enacted the Cost Containment Program with the objective to decrease the number of employment-related injuries.  Companies that implement and maintain a standardized loss prevention/loss control program are eligible for certification. 

"We have worked diligently over the past few years to implement a comprehensive loss prevention program to help keep our employees and subcontractors safe while on the job site.  Construction sites can be a dangerous place if they are not properly managed, and we want to keep all of our crews out of harm's way," stated Chris Gustavson, Vice President of Stonebridge Builders.  "We are extremely proud to have achieved our Cost Containment Certification, and are especially thankful to our Safety Director, Justin Newburn, for implementing and managing our safety processes.  We couldn't have done it without Justin."

"From large commercial projects to basement finishing projects, keeping our team safe is a critical priority," remarked Ms. Gustavson.  Stonebridge Builders' certification status can be viewed at the following web site, which lists all companies that are certified in the State of Colorado:

http://www.coworkforce.com/dwc/pcc/pcc.aspx

Stonebridge Volunteers with Local Animal Rescue Center

Stonebridge Builders has been actively volunteering to help a local dog rescue organization, Big Dogs with Huge Paws (BDHP).  BDHP is a non-profit organization comprised of volunteers dedicated to rescuing, rehoming and rehabilitating unwanted giant breed dogs that have been mistreated, neglected, abused or abandoned. 

Stonebridge Builders is currently providing "foster" care for Bo, a giant newfoundland dog, until he finds a permanent home.  Occasionally Bo comes to help work at the Stonebridge Builders' office and is a great mascot!  If you are interested in learning more about Bo, or any other dogs that require permanent homes, please see the following web site:

Big Dogs With Huge Paws

10 Tips for Green & Sustainable Building

The U.S. Department of Energy provides these 10 important tips for green and sustainable building:

1. Replace ordinary light bulbs with CFL bulbs. If every household replaced just one light bulb with a CFL bulb, America could save enough energy to light nearly three million homes.

2. Close curtains and shades at night to keep warmth in and keep them open during the day.

3. Try new lighting control technologies like motion-sensitive or timed off switch lighting. Using these new options can reduce lighting use by 50% - 75% and save the lighting portion of energy bills that account for 11% of overall household energy consumption.

4. Heating and cooling uses more energy and drains more energy dollars than any other system in the home. Approximately 43% of utility bills cover heating and cooling.

5. Install a programmable thermostat to keep your home comfortably warm in the winter and comfortably cool in the summer.

6. Replacing windows can save between 7% and 24% of the household heating and air conditioning costs.

7. Plug home electronics, such as TVs and DVD players, into power strips, and turn the power strips off when the equipment is not in use as TVs and DVDs in standby mode still consume several watts of power.

8. Choosing energy-efficient products can save families approximately $400 a year while reducing greenhouse gas emissions. Chose ENERGY STAR® certified products when you buy or replace household appliances.

9. In the workplace, buy and use ENERGY STAR labeled office equipment, and other products. Be sure that the “stand-by mode” function is activated as this automatic “sleep mode” saves energy and money when the equipment is not in use.

10. Regularly change the HVAC filters in the heating and cooling system of your home or office as dirty filters can cost up to $5 a month extra, overwork the equipment and result in dirtier indoor air. Consider purchasing “electrostatic” filters, which are washable, long lasting, and provide cleaner air. Clean or change filters more often if smokers or pollution sources are present.

Source: U.S. Department of Energy (www.eere.energy.gov/)

2010 AAMD Chili Cook-Off

Stonebridge Builders participated in the Apartment Association of Metro Denver's Chili Cookoff this past Saturday and had a great showing.  It was wonderful to visit with fellow subcontractors, clients, and all of their families.  

Our very own Patrick Quinlan spent 3 days roasting, soaking & peeling green chilis for an amazing green chili that was rumored to win the "best green chili" award, but when the votes were counted, we were not declared to be the winner.  Better luck next year.

Super Dave

While most of our blog posts are related to more *serious* company news, we couldn't help but share a hero story.  

Well Stonebridge Builders has something even better. Super Dave Hanson, one of our extraordinary Project Foremen:

Dave has recently been the subject of very high accolades from our clients.  At the end of each project, we ask our clients to complete a project evaluation to help us to improve our services.  Here is what folks are saying about Dave Hanson:

"We appreciated Dave Hanson.  He was a real help to us, explaining and setting up everything and checking back to see that things were done correctly." -Carol & Bill

"Dave Hanson did a nice job of floating a problem spot in the slab, also a good job of relocating a central vac PVC line.  A pleasure to work with.  Very responsive." - Phillip & Deborah

In short, we are thankful for such an amazing resource on the Stonebridge team and hope that you will have an opportunity to work with Dave Hanson or any of our other fabulous team members!

Stonebridge Builders Becomes Certified EPA Lead Renovator/Contractor

Stonebridge Builders has earned its accreditation as an Environmental Protection Agency (EPA) Certified Lead Renovator/Contractor. 

To protect against the risks of lead-based paint, the EPA issued a rule aimed at preventing lead poisoning.  Beginning in April 2010, the EPA rule provides that all contractors performing renovation, repair, and painting projects that disturb lead-based paint in homes, child care facilities, and schools built before 1978 must be certified and must follow specific work practices to prevent lead contamination. 

Completing the certification is a critical step for Stonebridge Builders due to the various renovation projects performed by the company, particularly in historical homes and facilities.  Chris Tolar, President of Stonebridge Builders states, "even though it is relatively clear to most of our clients that historical homes are at a high risk of containing lead-based paint, some clients are not aware that apartment buildings built around 1978, even into the 1980's, may also be at risk of including lead-based paint.  Because we work in both residential and multi-family apartment buildings, we are glad to be able to offer lead-based paint renovation techniques that will protect our clients and in some cases, their tenants."

Please see the following url for more information:

http://www.epa.gov/lead/pubs/renovation.htm