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COLORADO REAL ESTATE JOURNAL
— November 19-December 2, 2014
Greater Denver
which is informally called 360
Monroe, goes back about a dozen
years.
“I met Bobby and Jeff probably
in 2002 or 2001, when they were
working with Archstone,” said
Rifkin, whose father, Monroe, bet-
ter known as Monty, was a cable
television pioneer, teaming up
with Denver cable TV legend Bill
Daniels in 1959.
After selling their cable TV com-
pany, the Rifkin family concen-
trated on real estate investing.
Bruce Rifkin developed the
Monroe Pointe luxury condomin-
ium project at 333 S. Monroe St. in
Cherry Creek, for example.
“We kind of kept bumping into
Bobby and Jeff,” Rifkin said.
“Theyhad just completedaproj-
ect in downtown and they gave
me a tour of it,” he said.
The Rifkins considered buying
the site for Monroe Pointe and
building luxury apartments there,
instead of condos.
“Basically, the zoning was pret-
ty restrictive back then and they
couldn't put enough density on
the site for apartments,” Rifkin
said.
And the condo market was hot
… until it flickered out during the
Great Recession.
“We had some pretty amazing
presales in 2006 and 2007 and had
virtually no market from June
2008 until June 2012,” Rifkin said.
From mid-2012, it was like a
light switch flickedand sales lit up.
“Now, we are down to the last
five,”Rifkin said. “It has beenpret-
ty amazing.”
During the boom days in the
mid-2000s, Archstone was sold
and Smith and Jones decided
they wanted to stay in Denver
and formed their own apartment
development company.
The trio’s paths crossed once
again.
“I think I ran into Bobby in the
Cherry Creek mall and he toldme
they were starting their own com-
pany and they needed some office
space,” Rifkin
said.
“I
told
them we can
help you out,
because we
have an office
building at
360 S. Monroe,
right across
from Monroe
Pointe,” Rifkin
said.
Smith and Jones subleased
space in the building around 2009,
he said.
Monty Rifkin built the office
building on the site in 1972 and
headquartered his first cable TV
company there.
“After theywere there for a cou-
ple of years, one day Bobby and I
were walking across the parking
lot, and he said to me, ‘You know,
this would make a good apart-
ment development site.’”
Rifkinhadnever thought of that,
but themore they talked, themore
convinced he became that it was a
good idea.
The timing was good, because
the city had created the Cherry
Creek Area Plan to determine the
best way to grow the trendy area.
“We got involved in the Cherry
Creek Area Plan at its inception,”
Smith said.
That involved attending numer-
ous meetings with the city and
neighborhood groups to deter-
mine how they would like to see
that key 2.4-acre site developed.
Unlike many developments,
which have faced heated neigh-
borhood opposition, they had
strong support from all of the reg-
istered neighborhood organiza-
tions, Smith said.
“We really listened to what they
wanted,” Smith said.
They could have put a 12-story
building on the site, but decided
an eight-story building would be
more appropriate.
“We were able to move to the
next step and that was finding an
equity partner,” Smith said.
Smith had a relationship with
the former CEO of Gables Resi-
dential.
Gables was eager to enter the
Denver market.
“We made a conscious decision
to expand our footprint into Den-
ver about two years ago, driven
largely from both a desire to have
a mountain states presence and
based on the fact that there was
a solid apartment demand story,”
said Joshua Landry, area vice pres-
ident for investments for Gables
Residential.
He is thrilled by the Cherry
Creek site.
“The location specifically fits
our investment strategy of being
engrained into core, established
premium
neighborhoods,”
Landry said.
“We like the direct access to the
Cherry Creek hike and bike trail
as well as the proximity to premi-
um retail and believe these types
of adjacent amenities create irre-
placeable locations where people
want to live,” he said.
Landry saidGables and Smith/
Jones make a great team.
“Smith/Jones has introduced us
to some great real estate opportu-
nities,” Landry said.
He has found they are on the
same page with Gables and their
local knowledge and expertise has
been invaluable.
“There is a synonymous fun-
damental fit in how we view real
estate and their local relationships
have been instrumental in navi-
gating the various city processes,”
Landry said.
The building itself should feel
like a beautiful boutique hotel,
according to Smith.
“It will have a very sophisticat-
ed interior architectural design,”
Smith said.
“Semple Brown has designed
a very elegant main lobby with a
concierge reception area,” he said.
One unique feature will be an
“interior hiking bike trail,” that
will connect to one of the build-
ing’s greatest amenities – the near-
by Cherry Creek trail, according
to Smith.
“We think the proximity to
the Cherry Creek bike path is an
extraordinary amenity,” Smith
said.
“We really wanted to embrace
the outdoors,” he said.
The building, designed by
Ziegler Cooper of Houston, will
include a clubroom with a dem-
onstration kitchen and huge exte-
riorwindows, “with a terrific view
of the Rocky Mountains,” Smith
said.
Other amenities will include a
catering kitchen, a game roomand
“very large fitness room,” as well
as anoutdoor swimmingpool and
hot tub.
“By the pool, there will be an
outdoor kitchen and grilling area,”
Smith said.
“We are installing a radiant
snow melt system to melt snow
around hot tub,” Smith said.
The building also will include a
“commercial-grade”washing area
to clean everything fromresidents’
dogs to their kayaks, he said.
As is typical with new luxury
apartment developments in Den-
ver, there will be an area for main-
taining bicycles.
Rents, while not set yet, will be
commensurate with the top rates
in the city.
“We think this project will be
very suitable for a certain segment
of the market,” Smith said.
“Our residents will be people
who could afford to buy a home,”
he said.
Renters will be drawn to the
building “who want to live in a
carefree, very amenitized environ-
ment,” Smith said.
The typical size of a unit will
be 935 square feet, slightly bigger
than a lot of the newer luxury
units under construction.
The larger size will make the
building attractive to everyone
from young families to empty
nesters who have moved out of
single-family homes, he said.
“You are walking distance to the
Cherry Creek mall and all of the
restaurants and stores in Cherry
Creek North, without being in the
middle of all of the congestion and
noise,” Smith said.
Also, because of its proximity
to South Colorado Boulevard, it
will be an easy commute to either
downtown or the Denver Tech
Center area, he said.
This isn’t the only project in
Denver for Gables.
“We also have Gables Speer
Boulevard under construction
with Hanover and are exploring
other opportunities that are too
early to disclose,” he said.
Landry, however, is very cogni-
zant of all of the rental units being
added to the Denver market.
“As with any hot market, sup-
ply is always a topic of conversa-
tion,” Landry said.
“Absorption continues to
remain strong in Denver and we
believe that with the right product
type, quality and location that you
can be successful in spite of the
cycles,” he said.
Plus, Gables isn’t looking to flip
its properties.
“We are long-term holders and
feel great about the current funda-
mentals,” he said.
At this point in the cycle, Gables
ismore interested in developing in
Denver than acquiring properties.
“The current cap rate environ-
ment has steered us in the way of
building vs. buying based on the
current spreads,” Landry said.
“This may not always be the
case but it has made more eco-
nomic sense for us to develop in
the short term,” he said.
“We will continue to evaluate
fundamentals and adjust as the
markets provide,” Landry said.
For the Rifkin family, this will
be by far the biggest development
they have been involved with.
The Rifkin family looks forward
to the opening in about a year.
“We are really excited about
this,” Bruce Rifkin said.
“We couldn't have found a bet-
ter use for the property or better
partners.”
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Jeff Jones
pretty realistically,” Axelrod said.
“My internal projections tend to be
pretty conservative. I never could
have imagined in my wildest
dreams that the apartment market
would be this hot.”
The truth was, he wasn’t really
interested in selling the building, as
the cash flowwas strong.
“It’s a very nice building and I
was happy to continue to own it,”
he said. “Scott Shwayder is a friend
of mine and he told me, ‘I have a
buyer, who had looked at it when
we had briefly listed it before.’”
If everything were equal, he
still likely could have sold it more
as condos than as an apartment
building, Axelrod believes.
But the monkey wrench in the
works is the construction defect
litigation risk.
He still had two more years
before he no longer could be sued
for constructiondefects andwasn’t
willing to take the risk. He was
thinking he would own the prop-
erty for another two years and
then re-evaluatewhether to sell the
units as condominiums.
“Construction defect litigation
put a crimp in this deal,” Axelrod
said. “Construction defect litiga-
tion puts a real crimp in the entire
marketplace.”
The amount the buyer offered,
“just changed the risk-reward situ-
ation, as it was close to what I
could sell it for as condos. In this
case, everything worked out.”
Records show Alta Vera, con-
structed in 2009, has 24,607 square
feet, which equates to a sale price
of $290.57 per sf.
By that metric, the price is well
belowthe recent record$443.44per
sf paid for the 57-unit Logan build-
ing at 619 Logan St.
Alta Vera received such a high
price per unit because of its loca-
tion and quality of construction,
Lippitt said.
It also shows how attractive
these boutique urban buildings are
to investors, he said.
Lippitt declined to reveal the
name of the buyer, but public
records showthat itwaspurchased
by the Laramar Group based in
Chicago.
Laramar, on its website, showed
that units in Alta Vera range in
size from 1,168 sf to 1,400 sf, with
monthly rents ranging from $2,150
to $2,285.
That puts its rental rates from
about $1.70 per sf to more than $2
per sf, far lower than most of the
new units that recently opened or
are under construction in down-
town.
“This is really a first-class proj-
ect,” Lippitt said. “MoonStar is a
great developer. Plus, it has this
great urban infill location.”
Because it was developed to be
condos, all of the finishes are top of
the line, he said.
By the time the building was
ready to hit themarket, themarket
had changed so drastically that
there was no point in trying to sell
units, he said.
“It made much more sense to
rent the units as apartments,” Lip-
pitt said.
There would have been mul-
tiple bidders if Alta Vera had
been pitched to the entire market,
Shwayder said.
“We didn’t really market it to
everyone,” Shwayder said. “It
didn’t really go out to bid. If it had,
I am sure we would have a lot of
offers.”
He said they had listed it about
a year ago and then took it off the
market.
“We put it back on the mar-
ket after the market had really
heated up,” he said.
The ultimate buyer had shown
a great deal of interest in buying it
before and came back to the table,
he said.
Asked if the seller might have
done aswell or better by selling the
building as an apartment, rather
than selling the units as individual
condominiums, Lippitt said: “It
certainly is getting very close to
that point where it might make
more sense to sell a building as
apartments.”
This is the first time ever in Den-
ver that an apartment building
could sell for as much or more
than individual condos, Shwayder
said.
“I have been in this business for
a long, long time,” Shwayder said.
“Always in the past, there was
no doubt that you made more
money by selling condos, rather
than rental units,” he said.
“Now, for the first time in Den-
ver’s history, it is at, I don't know
what you would call it, maybe the
inflection point, where economi-
cally it might make more sense to
sell units as apartments, especially
when you consider the expense
and holding time of selling con-
dos,” Shwayder said.
Despite the record price per unit,
the buyer got a good deal, Lippitt
said.
“I certainly think there is some
room for appreciation and the
current owner is going to enjoy
increasing rents,” Lippitt said.
He said not only millennials
but also increasingly older baby
boomers, who are downsizing, are
interested in renting rather than
owning.
Also, a growing number of
renters are interested in renting
in neighborhoods such as Capitol
Hill/Cheesman Park rather than
in downtown.
Units rent for less and neigh-
borhoods such as Capitol Hill are
quieter and less congested than
downtown, he said.
Lippitt said he wouldn’t be sur-
prised if at some point Alta Vera is
converted into condos.
“Maybe you would call it re-
converted into condos, since that
was theoriginal plan,”Lippitt said.
“At some point, once all of this
construction defect lawsuit stuff
is worked out, I wouldn’t be sur-
prised if some place down the
road, converting the property into
condominiums could be an exit
strategy,” Lippitt said.
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