Colorado Real Estate Journal - February 18, 2015

HFF secures $57 million loan for One City Block apt. community

HFF recently secured $57 million in financing for One City Block, a newly built, 302-unit, Class A multi-housing community in downtown Denver’s Uptown neighborhood.

Working on behalf of its developer, Denver-based RedPeak Properties, HFF placed the fixed-rate loan with Cornerstone Real Estate Advisers LLC, acting on behalf of an institutional client.

Cornerstone, an indirect subsidiary of Massachusetts Mutual Life Insurance Co., is headquartered in Hartford, Connecticut.

The loan proceeds will be used to replace RedPeak’s existing construction loan.

One City Block encompasses a full city block bounded by East 19th Avenue to the north, Pennsylvania Street to the east, East 18th Avenue to the south and Logan Street to the west.

Completed in January 2014, the property includes 207,598 rentable square feet of residential space and 10,035 sf of ground-floor retail.

The four-story, LEED-certified property stabilized in less than a year and is 95 percent leased.

One City Block has a mix of studio, one- and two-bedroom floor plans and amenities, including a lap pool with sun deck and hot tub, grilling areas, fire pit, sport court with practice putting green, four rooftop terraces, fitness center, yoga studio, game room with pingpong and pool tables, demonstration kitchen, on-site bike repair shop and pet spa.

Mike Zoellner, president of RedPeak Properties, said One City Block has exceeded expectations.

“We had projected 18 units per month of absorption and the actual absorption was 30 units per month,” Zoellner said.

One of the reasons was the timing.

“It opened at a time when a lot of the new supply was not yet available,” Zoellner said.

“People shopping for apartments did not have as many choices as they do today,” he said.

Also, there is nothing else like One City Block on the market, he said.

“It has a different feel from all of our competitors. When you walk through the door, you feel like you are in a small community, yet you have all of the advantages of a 300-unit community,” he added.

Also, each building in One City Block has a different design and uses different bricks, so it does not have a “cookie-cutter” aesthetic, he noted.

Zoellner said working with HFF on the refinancing was a pleasure.

“HFF was just terrific to work with,” Zoellner said.

“I think HFF is one of the best in town,” he said. “They are very professional and their market research is great. And HFF’s network of capital resources is one of the best you will find.” There was a huge amount of interest from lenders on this deal, said Eric Tupler, senior managing director at HFF. He handled the transaction with Josh Simon, a managing director, and Leon McBroom, an analyst, in HFF’s Denver office.

RedPeak is a
really experienced
operator and when
you combine
that with the
great location
and quality of
construction, it
saw a great deal
of interest from
those wanting to
finance it.

“We really went out to the life insurance companies,” Tupler said.

Not only were the life insurance companies interested in it, but also it would have been appealing to any number of institutional lenders, he said.

“This is a best-in-class asset,” Tupler said.

“And it really has outstanding sponsorship with RedPeak.

“RedPeak is a really experienced operator and when you combine that with the great location and quality of construction, it saw a great deal of interest from those wanting to finance it,” he said.

What is happening now, given the record amount of apartment construction in Denver, is developers are looking to put in place permanent financing even before rents are stabilized, Tupler said.

“We are very busy right now with developers who have just started the lease-up,” Tupler said.

“If they plan to be medium- to long-term owners, they want to lock in debt at today’s low interest rates,” Tupler said.

He said they are worried about interest rates rising.

“Also, given the amount of new construction, there is some concern that they will be able to continue to get these record rents, given the competition from the new supply coming on line,” Tupler said.

One City Block, however, was stabilized.

But it leased up very quickly.

Deservedly so, as it hit all of the right buttons with renters, Tupler said.

“It’s probably one of the nicest properties I have ever been in,” Tupler said.

“It’s a dynamite property in a dynamite location,” he added.

“Mike Zoellner has a great eye for detail.

“The property flows very nicely and has this Class A location,” Tupler said. “Everything about it is well conceived,” he said.

“HFF provided RedPeak with a wide range of very competitive options and Cornerstone was terrific to work with,” Zoellner said.

“We look forward to doing more business with both parties in the future,” he said.

Tupler has done a number of deals with Zoellner and RedPeak in the past.

“I’ve probably known Mike for 15 years,” Tupler said.

“I knew him before he created RedPeak.”