Colorado Real Estate Journal - October 15, 2014
The Spanos Corp. has sold its recently completed Element 47 apartment community overlooking Interstate 25 in the increasingly trendy Jefferson Park neighborhood in Denver. Boston-based GID paid $69 million for the 265-unit community at 2185 Bryant St. T h e sale price equates to $ 260,377 per unit and $303.82 per square foot. “It is one of the key locations in Denver,” said John Winslow, principal of Winslow Property Consultants LLC. Winslow was not involved in the deal, but is a longtime observer of the Denver-area real estate market. The CBRE Investment Properties team of Dan Woodward, David Potarf and Matt Barnett represented Spanos in the sale. CBRE did not take the community to the market. Instead, it was a presale acquisition by GID. “It was based on a pro forma of $1.97 per square foot and they are getting above that amount,” Woodward said. “Everybody was very happy with this deal; Spanos was happy, GID was happy,” Woodward said. The appeal of a presale acquisition to the seller, of course, is it removes the lease-up risk.
The Element 47 sale was a bit atypical in that respect GID placed it under contract in October 2013, a year ago. “Because of construction delays, like everyone has been experiencing,” largely because of labor shortages, the final occupancy permit for the community was not issued until late August or early September, Woodward said. By that time of the sale, the community, which opened in phases, was 85 percent leased. Typically, a presale building would be mostly empty when the deal closed. “It has such high visibility and a great location that at times they were signing 15 leases a week,” Woodward said. “They were just killing it,” he said. Not only were leases signed at lightning speed, but also Element 47 has been achieving higher rents than anticipated. “I think they are averaging around $2.10 per square foot,” Woodward said. The building sold at a 5.5 percent cap rate. “I think if we were taking it to the market today, it would probably sell at a 5 percent cap,” Woodward said. “I do think we could have gotten a higher price if we had taken it to the market, but like I said, both sides were very happy with the deal,” he said. “Spanos sees the pipeline of units coming on line and they were a bit more risk averse than others,” he said. Thousands of cars drive by it on I-25 each day, giving it an unbelievable visibility to potential renters, Woodward said. “You see it for maybe 10 seconds when you are in traffic on I-25, but when you get up there and look at the views, they are just unbelievable,” Woodward said. “Some people may consider the area pioneering, but GID really understood the area,” Woodward said. “It’s very close to downtown and neighborhoods like West Highland; it is an area that is only going to get better,” he said. Spanos also built an attractive community with high-end finishes, Woodward said. Amenities include: an Internet café; business center and conference center; media room; great room; a gym with a separate aerobics/yoga room; club room; a rooftop deck overlooking downtown; and an outdoor pool. Spanos has been involved in the deal for almost a decade. In 2005, it unveiled plans to build a 357-unit project on the site, which had been the site of the Baby Doe’s Matchless Mines restaurant and a Chili Pepper restaurant. The restaurants closed in the mid-2000s. If the initial plan had gotten off the ground, Spanos would have delivered the first Class A apartment community in northwest Denver. The original development, called Pinnacle Station, was delayed under protests from the Jefferson Park Neighborhood Association, which felt it would bring too many rental units to the neighborhood. Spanos agreed to scale back the project, but construction was delayed by the Great Recession. When the market began to show signs of life again, Spanos rebranded the project as Element 47, which is the 47th element on the periodic table, a nod to Colorado’s mining heritage and Elizabeth “Baby” Doe, who in 1880 married Horace Tabor, who made a fortune in silver mining and was the richest man in Colorado at the time. Tabor later lost his fortune in the silver crash of 1893. Spanos tapped Kephart to design Element 47. This is how Kephart described it on its website: “Nestled in the established and esteemed Jefferson Park neighborhood, Element 47 is located in a vibrant, up-and-coming area of Denver. Located just west of downtown and near the banks of the Platte River, Element 47 is the epitome of