Extreme Themes
Since acquiring H20 in 2003, Boutique Apartments has grown its portfolio to include eight distinctively themed properties ranging from a hunting lodge and a U.S. Route 66 travel theme to an industrial factory and a retreat for photography fans. Barnhill has yet to see anyone else in the country offer a similar product. “We are really not trying to compete on the level of finish [like most developers do], but offer a totally different category that has a different benchmark,” he says.
Barnhill estimates that he spends about 35 percent of his time on the design process. “That is my favorite part of the job–the part I get excited about when I get up in the morning,” he says. Barnhill brainstorms with his creative team, which includes two outside designers, to develop a concept for each building. It typically takes the team about 60 days to choose the best theme for a property and another 60 days to select the exterior and interior finishes and artwork.
The goal is to select a theme “with enough teeth in it to create a whole building out of the theme without looking trite,” says Stephen Augustine, owner and president of graphic design firm Eye Candy Graphics, who is part of Barnhill’s creative team. “We don’t want to be a Disney World or a museum, but we do want people to smile.” The designers are definitely accomplishing their goal: Visit any Boutique property, and you’ll discover that the building is filled with unusual and creative pieces of art, many of which are collectors’ items. At Aperture, the company’s photography-themed property, the display includes an authentic drive-in movie projector and a 1920s Kodak sign.
The team draws inspiration for the themes and accompanying artwork from sources like books, magazines, and industry tradeshows. Some projects even call for the occasional road trip. “At one point, Grant and I were thinking about renting Harleys and taking a Route 66 trip just to do research [for the Route 66 project],” says Augustine. “We both got too busy for that, but I can see doing that type of stuff in the future where we go and visit [a place] and find all the nuances around it that we can bring in.”
Finding cool art and interior finishes is often the easy part; staying on budget can prove to be more challenging. “We always have to keep the budget in mind for every piece of art,” says Augustine. That budget is tight; the company allocated just $60,000 for all of Shambhala’s art, for example. So the company has developed quite an arsenal of innovative ways to find low-cost, yet unique, decorations. Favorite sources include eBay, junkyards, local artists and shops, and of course, the Internet.
“When we were designing Aperture I would typically get on the Internet at midnight, and I would search until 2 a.m. and buy stuff,” Barnhill says. “I loved it.” It took about six months of dedicated online shopping to purchase the 650 vintage cameras that fill the lobby at Aperture. At about $3.50 each from eBay, the cameras were certainly a steal. A few extra cameras even found their way to Barnhill’s office–the perfect addition to his eclectic office décor.
The hours of bargain hunting pay off. The renovated properties look incredible, says Alan Wyngarden, senior vice president of mortgage banker MegaStar Financial and an investor in Boutique Apartments. “They are very unique in what they doing, especially at that price point.” The 17-unit Route 66 shows the extent of the company’s originality. Replicas of old-fashioned gas pumps sit out front, while flattened oilcans (recycled from junkyards) line the walls of the mailbox center. The creativity extends to the units themselves, where state license plates from across the U.S.A. line the kitchen walls; retro-style black and white checkered light fixtures hang from the ceilings; and cabinetry doorknobs resemble car bumpers. A strong proponent of green building, the company incorporates as many sustainable components as possible, such as recycled carpeting made from soft drink bottles, wheatboard cabinetry, and Energy Star appliances.
Real Deals
Barnhill and his team aren’t just skilled at finding bargain design elements; they also know how to locate bargain properties that are ripe for renovation. “Through good negotiating skills, Grant can buy a building cheaper than anyone else can,” says Harris of ROI Equities. “It’s amazing.”
Boutique’s business strategy is to acquire older, troubled assets–generally in walking distance to downtown Denver–that are structurally and mechanically sound. While condo converters have certainly reduced the pool of available apartment buildings in Denver’s urban core, the converters tend to stay away from these problem properties, says Barnhill. “The remaining rental properties are a lot of the ’50s- and ’60s-vintage buildings that condo converters haven’t wanted to come in and renovate,” he says.
But Boutique sees potential in many of these troubled properties, many of which are aesthetically unappealing and ridden with drugs and crime. “Grant has a really imaginative brain that sees potential in buildings that no one else sees,” says Morgan Reynolds, chief operating officer at Boutique. “I would say to him, ‘You’re crazy.’ Now I say that less and less.”
For good reason. After a three- to five-month renovation, the company often nearly doubles the property’s previous rents as it opens the revitalized property to an entirely new renter profile. Take Shambhala. The company purchased the property for approximately $2.2 million, spent about $1 million on the rehab, and now collects monthly rents of $500 to $640, a significant jump from the previous monthly rents of $300 to $400.
A new Boutique Apartments property doesn’t just outperform its old self; it also typically commands rents that are 25 percent to 40 percent higher than the going rate at other apartments in the area, says Barnhill.
“Their business model is very impressive,” says Brian Bartlett, vice president of Citywide Banks, a Denver-based institution that provides the company with financing. “They buy right, and they control their costs so well. They build immediate equity into each property, and they can still offer the apartments at a competitive rate.”
In the future, Boutique plans to bring its themed properties to other cities with a large concentration of older assets, which include places such as Austin, Texas; Albuquerque and Santa Fe, N.M.; and Boise, Idaho. “We would like to own a hundred apartment buildings in the next five years, and then we plan to sell the portfolio in aggregate to probably a REIT or an institutional player,” says the ambitious Barnhill.
As Boutique enters new cities, the company plans to replicate some of its more popular themes, much like boutique hotels do, offering the same experience (i.e., Kimpton Hotels’ Hotel Monaco) in multiple markets. But no matter how much the company grows, you can be sure that Barnhill will continue to bring a touch of the Metropolitan Museum of Art to each Boutique Apartments property.