Colorado Real Estate Journal -
Archstone has kept its corporate office in the Denver area, but with a recent sale it no longer owns any apartment communities in the metro area. Archstone, which was taken private in a $22.2 billion deal in October 2007, recently sold the 480-unit Archstone Champions Park community in Thornton. The buyer was Boston-based Eaton Vance Management, which paid $68.25 million. That equates to $142,201 per unit, or $142.23 per sf, for the community that was constructed in 2001 on 28.4 acres at 2525 E. 104th Ave. “That is the last property Archstone owned in the Denver area,” said Jeff Hawks, who with ARA partner Doug Andrews sold the property to Eaton Vance, on behalf of Archstone. Archstone, as with a lot of large real estate investment trusts, is focusing its attention on the East and West coasts, Hawks said. “If you look at REITs like AIMCO and UDR, they are based here, but they are not active buyers in the Denver area, as they prefer to buy in California and the East Coast,” Hawks said. “I would say the activity of REITs buying in Denver has dropped by 90 percent since 2008,” Hawks said. Although Archstone is no longer publicly traded, on its website it said it focuses on “desirable neighborhoods” in metropolitan areas such as Washington, D.C., Southern California, the San Francisco Bay Area, New York City, Boston, Seattle and southeast Florida. Archstone has a portfolio of 59,355 units that it either operates or has under construction in 182 communities in the U.S. There was a lot of interest from prospective buyers for Champions Park, Hawks said. “We received more than 10 offers,” Hawks said. Private buyers such as Eaton Vance have filled the void left by REITs, Hawks said. “That has been made possible by the low interest rates,” Hawks said. “When interest rates are below cap rates, it gives the private buyer the higher yield it needs, allowing it to step up and buy more and higher-quality properties.” While not discussing Champions Park specifically, in the Denver area, most apartment communities are selling with cap rates in the 5 percent to 5.75 percent range, he said. “The only lower cap rates are found in downtown Denver and Boulder,” Hawks said. At the same time, interest rates have never been lower. “If a person comes in and wants to put half down on a project, he can get a rate below 3 percent,” Hawks said. “We just closed a deal where an investor locked in a rate on a seven-year deal with a 75 percent loan to value of 3.25 percent. Even on 10-year money, with a 75 percent LTV, you can get under 4 percent.” Hawks said he believes that this is Eaton Vance’s only purchase in the Denver area, although he said talking to other ARA brokers across the country, it has been active in buying individual properties in other markets, sometimes in joint-venture partnerships. “I would suspect they bought it as a long-term hold,” Hawks said. “They bought it below replacement cost,” which he estimates is $150,000 to more than $170,000 per unit. He said the property has a great location. “If you look at the 104th corridor, it really has become the main route for that northwest corridor to DIA,” Hawks said. In addition to being a direct shot to the Denver International Airport, it is easy to get to downtown Denver, Interlocken or Boulder from the community, he said. Architecturally, Champions Park is unlike any suburban garden-style apartment community in the Denver area, Hawks said. “Randy Bryant at Catalina Development built the property,” Hawks said. Catalina later sold it to Archstone. “It has a special design,” Hawks said. “It is apparently the only one like it in Colorado.” Typically, he said, three-story apartment communities have walkways in the middle that not only allow renters to get to their units, but serve as fire exits that are open at both ends. “This one has no breezeway,” Hawks said. “How they did that is they built private patios in front of each unit, but the patios touch each other, so they also serve as a fire exit. It’s an award-winning design. I believe they paid a significant premium for it.”