Colorado Real Estate Journal - September 17, 2014
A Chicago firm recently purchased the Apartments at Denver Place, which soars above the RitzCarlton hotel. Waterton Residential paid $38.78 million for the 193-unit tower at 1880 Arapahoe St. The first level of the tower starts on the 20th floor and runs to the 37th floor. “Where their views start tops most penthouses in Denver,” said Terrance Hunt, a member of the ARA team that sold the property on behalf of the Florida-based owner, SAS Mortgage Trust Denver Place, a limited liability company created by Seminole Financial Service, based in Belleaire Bluffs, Fla. “This is a great asset; an irreplaceable asset,” Hunt said. Other members on the ARA team involved in the transaction include Doug Andrews, Jeff Hawks, Shane Ozment, Jason Wine and Anna Perry. There is not only nothing else like it in Denver, but also there is nothing else like it anywhere. “The Apartments at Denver Place is the only apartment community in the world perched atop a five-star Ritz-Carlton hotel,” according to the detailed brochure ARA created to sell the property. The sale price equates to $200,907 per door and $220.97 per square foot. Rents at the Apartments at Denver Place average $1.77 per sf, which is less than many of the newer apartment communities in downtown and in the Highland neighborhood. Rents run from $1.36 per sf to $2.29 per sf. “This is definitely a value-add opportunity,” Hunt said. The seller had renovated 102 of the apartments with granite counter tops, new appliances, vinyl hardwood flooring and new brushed-nickel fixtures and hardware. The average renovation cost $9,000 per unit and generated an average of $250 in additional rent for a return on investments of more than 30 percent. In addition, the seller renovated another 30 units with new kitchen cabinets and washers and dryers at an estimated cost of $12,000 per unit. Those premium renovations generated a return on investment of 28 percent with an average of $275 additional rent. “Waterton is going to spend about $20,000 per unit on renovations and upgrades,” Hunt said. Hunt said the renovations will be worth it. “The Apartments at Denver Place has a great location,” he said. A FasTracks light-rail station is only two blocks away and a circular shuttle system is proposed for 18th and 19th streets, running between LoDo and Civic Center Plaza. It also is adjacent to the fledgling Arapahoe Square neighborhood that ARA describes as an “emerging hotbed of redevelopment.” In addition, residents have access to the 68,000-sf Forza Fitness and Performance Club and the 9,000-sf Ritz-Cartlon spa, both of which are in the mixed-use development. “No one else can offer an amenity package like this,” Hunt said. “It is an unusual property,” said John Winslow, principal of Winslow Property Consultants. “It is kind of a consortium of the hotel, offices and high-end condo properties,” said Winslow, who was not involved in the transaction, but is a longtime observer of Denver commercial real estate. “The rents are not low at the Apartments at Denver Place, but when you compare it to other, newer properties downtown, it is actually less expensive than many other buildings,” Winslow said. “It has great access to everything downtown, which is so important to millennials and an amenity package with the access to the health club, which really in unmatched,” he said. “The downside with the property is the units don’t have balconies,” Winslow said. “But if you are scared of heights like I am, I don’t know if I would want a balcony the 30th floor,” he said. The property was listed for $45 million. Winslow said he was surprised that it didn’t fetch the asking price, or even a bit more. The deal was more complex than just about every other apartment community because of its unique nature, Hunt said. “There is a HOA and some complexities with multiple ownerships of systems and sharing of systems in the same building,” Hunt said. “Those complexities, which you just don’t find anywhere else, dwindled the potential buying pool a bit,” Hunt said. However, even some condo converters looked at it. “We actually had it under contract in 2007 to a condo converter for $60 million,” Hunt said. “That was before the world changed,” and condo and other residential real estate prices crashed in downtown, before reaching new highs in the past two or three years. For example, the Four Seasons condos in Denver slashed its prices by about half in order to sell units that originally were priced at $1,000 or more per sf. Nationally, Waterton has invested $4.8 billion in multifamily properties, representing $1.7 billion in equity in them. Its portfolio includes 137 properties with more than 48,000 units and 10 debt positions of more than 95,000 units with a principal value of $6.2 billion, according to its website. In Colorado, it also owns the Tantra Lake Apartments in Boulder and 9100 Vance apartments in Westminster.