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Page 8 — COLORADO REAL ESTATE JOURNAL — March 4-March 17, 2015
Greater Denver
by John Rebchook
Walker & Dunlop Inc., a public-
ly traded mortgage lender based
in Bethesda, Maryland, is bullish
on Denver.
So bullish that Walker & Dun-
lop made about $500 million in
loans in the Denver area last year.
The majority of the loans were
for apartment buildings, although
the company, with about a $590
million market cap, also made
loans for some manufactured
housing communities and office
buildings in the Denver area.
Combined, Walker & Dunlop
made more than 25 loans in the
Denver area in 2014.
They ranged in size from a $1
million supplemental loan to one
for more than $65 million. The
company, which trades under
the symbol WD, said it could not
reveal details of the largest loan.
In one deal, Ellen Kantrowitz,
seniorvicepresident, ledtheWalk-
er &Dunlop team that arranged a
$59 million U.S. Department of
Housing and Urban Develop-
ment loan for 300 East 17th Ave-
nue Apartments in Denver.
The 411-unit apartment com-
munity is owned by Maxx Prop-
erties.
Maxx Properties is using the
proceeds from the refinance to
upgrade the community, which
was built in 1985.
“We’re doing a tremendous
renovation there. We are going to
transform the courtyard and real-
ly bring the building up to mod-
ern standards,” said Eric “Rick”
Weiner, CEO of the 78-year-old,
family owned Maxx Properties.
Maxx Properties owns about
3,300 apartment units in the Den-
ver area.
“We are in
seven states
and Colorado
is our best-
per forming
m a r k e t , ”
Weiner said.
Now is a
great time
to renovate
communities,
Weiner said.
“The apartment market has
never been hotter here and in Col-
orado,” Weiner said.
“Everyone wants to live here,
especially millennials, to take
advantage of our great economy
and quality of life,” Weiner said.
He said they are renovating
every property they own in the
Denver area.
“That really has been our focus
for the past two years,” he said.
“We also want to take advan-
tage of these incredibly low inter-
est rates,” Weiner said.
“Really, this is a perfect storm
as far as demand and low interest
rates,” he said.
Maxx Properties has even
locked in a number of 35-year
loans.
“We’re long-term holders,” he
said. “We don’t sell.”
Walker & Dunlop did a great
job for them at 300 East 17th Ave-
nue Apartments, he said.
“I think a broker we utilize in
New York put us together with
them,” Weiner said.
“It was really a great experience
working with them,” he said.
“They had a great program
with great terms and a great inter-
est rate,” Weiner said.
Going forward, he said Maxx
Properties would continue to use
a variety of lenders, depending
on the apartment community and
the programs offered by the lend-
ers.
So why is Walker & Dunlop so
bullish on Denver?
“The economy is thriving in the
Denver area,” aWalker &Dunlop
spokeswoman toldColorado Real
Estate Journal.
She noted that Forbes magazine
ranked Denver as the fourth best
city in the nation for business in
2014.
She also said Denver is bol-
stered by its diverse economy,
which includes technology, tele-
communications, mining, energy
and the arts.
“With current real estate mar-
ket trends, financing options and
increased population growth,
Colorado has become a premier
destination for employment, resi-
dency and recreational activities,”
the company noted.
The Denver apartment market
last year boasted record rents and
very low vacancy rates, which is a
trend that is expected to continue.
Walker & Dunlop pointed to
Denver’s low unemployment
rate, now at 4.1 percent.
High employment has resulted
in above-average apartment occu-
pancy rates and rising rents, the
company noted.
Those economic basics also
have made Denver a sought-after
market from investors, the com-
pany said.
“Investors have expressed addi-
tional interest in attractive loan
options for value-added sales
and recently Colorado has seen
a surge in out-of-state investors,”
the company said. In addition
to the 300 East 17th deal, other
transactions in the Denver area
included:
• Andrew Gnazzo, a manag-
ing director, originated a 10-year
Fannie Mae loan for Windsor at
Broadway Station.Walker &Dun-
lop expedited the process, allow-
ing the borrower to lock the rate
and close on a tight time frame for
a 1031 exchange; and
• Trevor Fase, a senior vice
president, originated a supple-
mental loan for the Preserve at
City Center in Aurora. Walker &
Dunlopgenerated the first loan on
the property, a 10-year, fixed-rate
loan, in 2013. In the latest deal, the
borrower obtained a $6.35 million
supplemental loan for value-add
amenities.
The average size of a loan that
Walker &Dunlopmade in 2014 in
Denver was $19 million.
Walker & Dunlop has a mini-
mum loan size of $3 million and
no maximum loan size.
Last November, Walker &
Dunlop acquired a Denver office
through its acquisition of the
Johnson Capital loan origination
and servicing platform.s
Walker &Dunlop provided a $59million refinance loan for 300 E. 17th Ave.
Eric “Rick” Weiner
Properties group in Denver, said
373 Inverness drew strong inves-
tor interest. “What drove the
activity was a very, very well-
located asset that was across the
street from the Colorado Ath-
letic Club-Inverness and all the
amenities that are in Inverness,”
he said. The building provides
walkability not only to light
rail but also to Park Meadows
shopping center via a pedestrian
walkway over Interstate 25.
Investors also were attracted
to the fact that the building has
long-term leases in place as well
as upside. “The ability to lease
up the last remaining suite and
achieve full stability added to
the attractiveness of the offer-
ing,” said Baukol, who handled
the transaction.
SKB has acquired the property
from Commonwealth REIT as
part of a portfolio deal about 1½
years ago. “We executed a strat-
egy to do some capital improve-
ments to the asset and perform
lease-up, and we got it to the
point that it made sense now to
sell the asset,” said Rich Morean
of SKB.
Ampio occupies just over
19,000 sf, while Rockwell Auto-
mation leases more than 15,000
sf. The building’s largest tenant
is Hope Online Learning Acade-
my, an online charter school that
has its offices in about 26,000 sf.
The two-story building was
built in 1984.
Diamond Ventures is a pri-
vately held real estate invest-
ment and development com-
pany that owns office and retail
assets in Tucson, Phoenix and
Flagstaff, Arizona, as well as the
146,215-sf Tech Center II office
building in Colorado Springs.
The company likes the office
sector right now because rents
haven’t risen to the point that
there is not a lot of speculative
construction, said Kelley.
Cushman & Wakefield of
Colorado will manage 373
Inverness. David Lee and his
team at Newmark Grubb Knight
Frank will handle leasing.
“We’re excited about doing
business in Denver,” said Kel-
ley. “Denver is a very dynamic
area.”s
vice president in JLL’s Hotels &
Hospitality Group.
“Moreover, these particular
hotels are located near some
of the most robust demand
generators in the market, such
as hospitals, corporate office
parks and the downtown
core,” he said.
In fact, four of the hotels are
near hospitals, accommodating
people coming to Denver for
outpatient surgeries, out-of-
town families of hospital inpa-
tients as well as business and
leisure travelers.
“We are very proud of these
five TownePlace properties and
their performance leading up
to this sale. We look forward to
continuing their management
contract and driving perfor-
mance as excellent extended-
stay options in Denver,” said
Michael Everett, Sage Hospital-
ity chief investment officer.
The hotels and recorded sales
prices were:
• TownePlace Suites Denver
Downtown, 685 Speer Blvd.,
122 rooms, $23.94 million;
• TownePlace Suites Boul-
der/Broomfield, 480 Flatiron
Blvd., Broomfield, 150 rooms,
$16.46 million;
• TownePlace Suites Den-
ver West/Federal Center,
800 Tabor St., Lakewood, 106
rooms, $13.74 million;
• TownePlace Suites Den-
ver Southeast, 112 rooms, 3699
S. Monaco Parkway, Denver,
$13.08 million; and
• TownePlace Suites Denver
Tech Center, 7877 S. Chester
St., Englewood, 94 rooms, $9.03
million.
Fraioli, who is based in JLL’s
San Francisco office, said insti-
tutional investors have been
drawn to Denver’s hotel mar-
ket – and similarly to markets
in Portland and Seattle – over
the last two years due to strong
net in-migration, growth in
high-wage jobs and hotel fun-
damentals.
“The properties produce a
high level of cash flow and
therefore an attractive yield
relative to other types of real
estate,” he said. Historically,
hotels also have carried a high-
er degree of risk, but that has
been mitigated by increased
professionalism in hotel man-
agement, with brands such as
Marriott increasingly able to
perform in both up and down
cycles in the economy, said
Fraioli.
Institutional investors also
tend to diversify geographi-
cally, and that also lessens their
portfolio risk, he said.
The TownePlace Suites hotels
fall into two very desirable seg-
ments of the market: select ser-
vice and extended stay.
Select-service hotels have
performed well because they
don’t have amenities such as
restaurants, bellhops and room
service. “All those things are
usually costs that create addi-
tional pressure on profit,”
Fraioli said. “These hotels are
very efficient because they are
providing a very high-quality
guest room and there are not
a lot of additional services.
They’ve been very profitable
as a segment.”
Also, extended-stay hotels,
where an average of 40 to 50
percent of guests say three
nights or longer, add another
level of profitability. “Most
costs associated with a guest
stay (a request to change rooms,
get a toothbrush, etc.) are expe-
rienced in the first day,” Fraioli
said. Requests for maid service
may be lesser, depending on
the guest.
The Denver hotels, he said,
“were built and located with
this extended-stay business
model in mind, and that’s part
of the reason they’ve been so
successful,” he said.
The hotels underwent a com-
prehensive renovation of guest
rooms and public spaces in
2013. “They were very well
managed by AB and Sage,”
Fraioli added.
Fraioli handled the transac-
tion with JLL Managing Direc-
tor Mark Fair and Chris Dewey,
senior vice president.s
ʻWe’re doing
a tremendous
renovation there.
We are going to
transform the
courtyard and
really bring the
building up to
modern standards.ʼ
– Erik “Rick” Weiner,
Maxx Properties