Colorado Real Estate Journal - September 17, 2014
Denver-based Apartment Investment and Management Co. recently paid $118.5 million for the 600-unit 21 Fitzsimons apartment community in Aurora, according to public records. The sale last month was the largest apartment sale so far this year and the third largest ever in the Denver area. Even though the $5 billion company, better known as AIMCO, is based in Denver, the giant apartment o w n e r r a r e l y makes a purchase in its backyard. It is believed to be AIMCO’s first purchase of a single community in the Denver area since founder Terry Considine took the company public in the mid-1990s. “It could be,” Considine said. “I would have to stop to think about it. It’s been a long time.” In any case, the sale by the Pauls Corp. was a big one. Only the $190.5 million sale of the 1,527-unit Breakers Resort and the $176 million sale of Palomino Park, with about 1,200 units, were larger. Considine is thrilled with the acquisition, which was driven by its proximity to the Anschutz Medical Campus and the Fitzsimons Life Science District. “I think that whole Fitzsimons campus, due to the efforts of the University of Colorado and the generosity of Phil Anschutz and the Children’s Hospital and the VA hospital, has brought together a collection of talent that is pre-eminent throughout the entire region,” Considine said. “It’s a very interesting hub of intellectual capital that will generate jobs and hopefully will drive good demand for rental housing,” Considine said. “Our goal is to provide the rental housing,” Considine said. “Really, what we are doing is riding the slipstream of good work being done by others,” Considine said. Renters, he believes, will come from the hospitals, schools and biotechnology startups on the campus. “I think there are something like 11 different schools there,” Considine said. “It is an amazing concentration of medical education opportunities.” Neither the sales price nor the buyer were disclosed by the ARA brokers who represented The Pauls Corp. in the sale. The property was listed by ARA brokers Doug Andrews, Jeff Hawks, Terrance Hunt and Shane Ozment. The sale was the largest of $270 million in transactions handled by ARA in a two-week period. “There were a lot of (potential) buyers, but not a tremendous number of bidders,” compared with other transactions, Hawks said. Given its price, only large institutional investors, such as real estate investment trusts, pension fund advisers and insurance companies, could afford it, limiting the pool of buyers, Hawks said. “It’s also brand-new, so there is no value-add component, which so many investors want in this market,” Hawks said. The sale equates to $197,500 per unit and $222.15 per square foot. “I do believe the buyer purchased it below replacement cost,” Hawks said. “Anything you buy today will cost more to build in the future,” because of rising labor and material costs, he said. There also are barriers to entry in apartment development in Aurora, he said, even though there is land for development. “Aurora is a very expensive place to build in,” because of its fees, which are among the highest in the metro area, Hawks said. The apartment community includes six four-story apartment buildings on 11.7 acres. The Pauls Corp. completed construction of the first phase six years ago and completed the third phase this year. The community includes 17,462 sf of retail space. Retail tenants include the Collegiate Peaks Bank, Coda Beer and ProCare Pharmacy. “This has been a ‘pride of ownership’ asset for The Pauls Corp.,” said Paul Powers, president of the company, whose principal is Bill Pauls. ”Our entire team has made this a best-in-class apartment community,” Powers said. “We are very pleased that the buyer, for whom we have a great deal of respect, will be the new owner,” he said. Considine returned the compliment. “I need to do a shout out to Bill Pauls and Paul Powers,” Considine said. “I’ve known them both for a really long time,” Considine said. “They are good people and they are good real estate people. They were a pleasure to work with.” Hunt, of ARA, said everything Considine loves about the apartment community is on target. “Twenty-One Fitzsimons is located at the epicenter of the largest medical development in the United States,” Hunt said. “The Fitzsimons Life Science District continues to add jobs daily with one of the biggest bumps in employment coming with the completion of the new VA hospital that will open in early 2015,” he said.
He added that with 600 units, “21 Fitzsimons will control the majority of the rental market in the area due to the limited ability to add additional apartment communities in the immediate vicinity.” Considine bought the community as soon as the ink was dry on the opening of the third phase of 173 units. “We closed after final certificate of occupancy for the third phase,” Ozment said. “Construction of the first phase began in 2007 and the third phase was just completed (in August.) Through construction of the second and third phases, the property was able to adapt to the most in-demand floor plans, maximizing value to those on the Fitzsimons campus.” The first phase had 240 units and six ground-level retail suites with a total of 16,098 sf. The second phase was completed in 2012 with 187 units with an average size of 750 sf. Units in the third phase average slightly more than 700 sf. The third phase includes 1,364 sf of retail. While 21 Fitzsimons is the flagship community for AIMCO, it also owns other apartments in the metro area, including in the Denver Tech Center and in Boulder. AIMCO acquired some local holdings as part of larger, portfolio purchases. Considine said that AIMCO has looked at buying properties in the metro area in recent years, but until now hadn’t pulled the trigger. AIMCO continues to be interested in finding opportunities locally, he said. “Investing is always a question of what other alternatives are out there,” Considine said. “Right now, the Denver economy is booming and demand for apartments is strong,” Considine said. “All of our other holdings here are doing quite well. I’d like to buy more here if we found the right opportunity.”