February 22, 2022 • Chris Lopez
Today, I have two guests from Kaufman Hagan Commercial Real Estate—Brandon Kaufman and Gunnar Wilson—to talk about a unique listing. The Essex is a designated historic landmark that was recently renovated from top to bottom. A new owner will have the option to continue operating it as a short-term rental, which is very rare in Denver. Download the Offering Memorandum (OM) to find out all of the details and see pictures.
Your Chance to Own a Renovated, Historic Denver Building
Built in 1907, the Essex was designed by renowned architectural firm Fisher & Fisher. This firm designed other landmark buildings in the city, such as South High School in Washington Park and the Midland Savings Building downtown. In 2018, the city of Denver designated the Essex a historic landmark.
The building is located in the Uptown neighborhood. Just minutes to downtown, blocks from the hospital, and surrounded by restaurants and attractions, this is a prime location that residents will love. Gunnar lives in this neighborhood himself, and he enjoys the proximity to the 17th street corridor and Uptown Square.
This 20-unit property has a layout mix of a studio and 1- and 2- bedroom units. A 2018 renovation brought this 115-year old building into the modern era. Because of the historic designation, the city oversaw the renovation to ensure that the modernization of the building was in line with their requirements, such as repairing the windows instead of replacing them. Passersby will think the Essex is a retro build rather than a historic building.
Tenants will appreciate the upgraded electrical panel that accommodates in-unit washers and dryers as well as splits that allow individual control over A/C and heating. 600 sq ft units are spacious and modern. Even the balconies underwent a stress test to ensure they can accommodate tenants.
This is a great opportunity for an investor to place their capital into a building with no deferred maintenance.
Long- and Short-Term Rental Options
Short-term rental licenses are very hot, particularly in Denver. The new owner will have the option to continue the short-term rental structure or convert the units to traditional long-term rentals.
For the past three years, the Essex has been operating successfully as a hotel. A company held a master lease that allowed them to pay above market rates and then rent out the units at a nightly or weekly rate, keeping the profit. That lease was discontinued as the building came on the market. All of the furnishings convey with the building, about $100K in value.
Another option for the owner is to lease the building as traditional long-term rentals. Kaufman Hagan has a pro forma with Cornerstone, a well-known property management company in Denver.
The building is listed at $9M. The unfurnished cap rate is 4.38%, while the furnished cap rate is 5.09%. The pro forma with Cornerstone works well, too, with a 4.5% cap rate for long-term rentals.
Although the units are renovated, there is an opportunity to lightly upgrade them to bring rents up to market rates. In addition, owners can choose to convert the community space into an additional unit.
Kaufman Hagan is marketing this building quietly and doesn’t intend on putting it on the market. They want to find someone who appreciates the building’s history and all that it has to offer.
Kaufman Hagan is taking a unique approach to marketing properties, including podcasts and digital ad blitzes. Reach out to them to learn more, or to see the Kaufman Hagan difference on your own property.