The storage room looked like a scene from the Metropolitan Museum of Art. A 150-year-old monastery door from a temple in Burma, a 3-foot-tall statue of Buddha, and countless other Far East treasures covered the cold basement floor. These artifacts, though, were not destined for the famous New York museum, but instead for the newly renovated Denver apartment building in which they sat, waiting to be displayed.
The 60-unit property, named Shambhala (a mythical kingdom in Buddhist culture) for its celebration of Eastern philosophy and culture, opened just a few months ago. It is one of the latest imaginative creations from Boutique Apartments, a Denver-based private real estate company that develops, owns, and manages a distinctive line of themed rental buildings in downtown Denver offering rents geared toward middle-income young professionals.
Grant Barnhill, the company's president and creative mastermind, spent weeks shopping for the artifacts on display at Shambhala. "Grant loves the design aspect," says Jamie Harris, principal of ROI Equities, a Denver-based real estate investment company and an investor in Boutique. "That is really unique because most investors are pretty driven by the numbers, and they are not looking outside the box." Barnhill's passion for art is unmistakable: His office hosts a collection of worldly artifacts including a wall-size Indian wood carving of Hindu gods and a desk made from an antique door that was once part of a Tibetan monastery.
But Barnhill has more than a keen eye for art: He also knows how to find a good deal. "There's a convergence of three different areas that we have to do really well," Barnhill explains. "First, we have to buy the asset right. Second, we have to do the construction and the rehab in a cost-effective way, and the third piece of the puzzle is making sure that whatever design we implement in the building to make it a Boutique Apartment is cost-effective."
The company does this by searching for bargain prices on older, mismanaged assets and then finding low-cost artwork and other creative finishes to reposition the properties with arts-oriented themes. Staying within a tight budget is essential since the company's stated goal is to offer stylish apartments at reasonable rents for young professionals who want, but can't afford, the latest hip downtown property.
Barnhill, an avid traveler, came up with the idea to create Boutique Apartments while traveling around the world (a trip he financed by selling 20 apartment buildings that he renovated and sold during the late 1990s). During the trip, he stayed at numerous boutique hotels, which sparked the idea for a similar apartment product line. "I kept thinking, 'Why don't people do this in the apartment market?'" he remembers.
So after stops in Southeast Asia, Europe, and South America, Barnhill partnered with industry colleague Zvi Rudawsky to start Boutique Apartments (formerly Portus Funds) in 2002. But the duo wasn't interested in the standard business strategy of creating creative properties with high-end rents. Instead, Barnhill was determined to develop stylish apartments priced to fit the budgets of young professionals, which he remembers as being frustratingly hard to find when he was starting out himself.
"For someone who makes $25,000 to $50,000 a year [in Denver], they have two choices," says Barnhill. "They can live way beyond their means in a new apartment building, or they can live in a rundown, older property, some with crime problems. We are serving the middle market." The company's studios and one- and two-bedroom units tend to rent in the $495 to $950 range, while studios at nearby Class A properties start at $850, says Barnhill.
"Grant has identified a niche that I wasn't even aware existed prior to the idea of these apartments," says Harris of ROI Equities. "Most of the apartments [in Denver] are either high-end or low. This is a specific mid-range apartment."
Boutique's first acquisition: the approximately $900,000 purchase of a 1950s downtown Denver building now called H20, which boasts a water theme featuring decorative submarine parts and an outdoor sculpture of a huge faucet. The two-man company initially based their operations out of the building's basement (quite a change from their current upscale office space in Denver's trendy LoDo area). "We wanted to go in and use our own money, and just test the concept before we started to really scale the company and offer investors the ability to invest with us," says Barnhill. The company acquires and manages its properties on behalf of investor clients. (See "Smart Investments," page 40.)
The H20 project was a success, thanks in large part to the executives' dedication. "The construction was going slower than we wanted it to, and there were just a lot of loose ends that needed to get done, so we strapped on the tool belts and finished up the project," recalls Rudawsky, vice president. The hard work paid off. The company renovated the building for just less than $360,000 and rented the units for 40 percent higher than the building's previous owner.
In addition to savvy business skills, Barnhill and Rudawsky attribute much of the company's success to their complementary talents. "It's a really good partnership," says Rudawsky, who managed a $100 million apartment portfolio prior to joining Boutique. "I have a very strong management background, whereas Grant has more experience in the acquisition, disposition, and design side." Barnhill's resume includes 20 years of real estate experience, most recently founding both the real estate investment firm Barnhill & Co. and brokerage firm Liberty Partners (now Liberty-Greenfield).