Colorado Real Estate Journal - June 18, 2014
Delwest Capital LLC, a private real estate group based in Denver, recently celebrated the grand opening of the 168-unit, $25 million Park Hill 4000 luxury apartment community adjacent to the Park Hill Golf Course. “We should pretty much be wrapped up (with the final construction) in mid-July,” said Joe DelZotto, principal of the firm that has built more than $500 million in properties in the Denver area during the past two decades. While Park Hill 4000 – on a 7.5- acre site at 4000 Albion St., near a future RTD FasTracks commuter rail stop at East 40th Avenue and Colorado Boulevard – just opened, DelZotto actually can trace his involvement in the dirt back more than a decade. “Basically, our involvement in it goes back to 2003,” DelZotto said. “I’ve been involved with it in one iteration or another for a very long time.” Initially, it wasn’t going to be an apartment community, although DelZotto is thrilled that is how it turned out. When Delwest first acquired the property, it was going to be a for-sale condo and townhome project. After all, that is what Delwest developed since DelZotto came to Denver from Canada, where his family is a big and long-term player in residential real estate development. The Great Recession, however, derailed plans for condos. “We had already sold a number of condo units to investors (in other development on adjoining land), but then after that big adjustment in the real estate market, you couldn’t sell condos,” he said. Not only were condos difficult to finance, but also construction defect liability concerns made developing condos just about unthinkable. “Given the threat of lawsuits, I never plan to build another condo project in Denver,” DelZotto said. “I suppose never say never, but truly I have no interest in developing another condo development in Denver,” he said. However, he noticed an interesting trend. While the condo market was dead, the apartment market was never stronger. “All of the investors were renting out their units,” he said. “They had no problem renting them. All of a sudden, a light bulb went off in my head. We had been taking the wrong approach with for-sale units and the whole 7.5 acres should be apartments.” He also said apartment construction is more efficient than condo construction as he can have all of the subcontractors on the job, as needed, during the entire building process. With condo construction, he said he would have to bring in subcontractors for interior work as the units were being sold. If subcontractors did not show up when scheduled, it delayed the projects, he said. As he walked along the property, he said, “it just felt right” to build apartments on the parcel. Also what felt right was to build a first-class clubhouse as an amenity to residents of Park Hill 4000. And he wanted it to be a prominent amenity. “We had all of these charettes and things and they suggested we place the clubhouse in the interior (of the seven-building community), but I wanted it facing the golf course,” DelZotto said. “I saw the clubhouse as a resortstyle amenity and I wanted it to be a prominent feature opening to the golf course. Why not take advantage of the golf course that way?” Kephart Architects designed Park Hill 4000 and Drahota built it. The Park Hill 4000 apartments and clubhouse were designed to meet Xcel Energy’s Energy Efficient Buildings program stan dards to optimize energy efficiency and energy savings. “We have a 10-kilowatt photovoltaic system on the roof of the clubhouse and, interestingly, it will just about supply all of the electricity needed for the clubhouse,” he said. Park Hill 4000 opened 70 percent leased. Rental rates are 25 percent higher than originally projected. “Amazingly, we’re getting rents at about $1.50 per square foot,” DelZotto said. He said the pro forma projections were $1.20 per sf. One reason it is doing so well, unlike other areas of Denver such as LoHi and Union Station, where there are fears of overbuilding, is that Park Hill has, if anything, a shortage of apartments. “Basically, if you want to do apartments in Park Hill, you have to tear something down,” DelZotto said. “To do apartments in Park Hill, they are true infill developments,” he said. “There are not many big parcels of land like this available in most of Park Hill. It just doesn’t exist. It is actually very hard to comp because it is truly unique.” The first wave of renters “covers the entire gamut,” he said. “We have people who work downtown, as you might expect. And because of our location at Interstate 70 and Colorado, we have people who even use that as a way to get to the U.S. 36 corridor.” When the commuter train station opens in 2016, it will be even better for residents at Park Hill 4000, he said. “You will only be two stops to Union Station in downtown,” he said. “This will be a true transitoriented development. The commuter rail station will make Park Hill 4000 great for couples, where one person works downtown and the other someplace else.” The construction was financed by a HUD 221(d)(4) loan and family equity. DelZotto is looking to develop 156 workforce housing units on nearby land, which is owned by the Urban Land Conservancy. He also is looking to develop other apartment communities in the metro area. He currently is looking at a piece of property along the southeast corridor, for example. “I think our sweet spot would be to look at land that could handle units in the 220 to 250 range,” he said. One thing he doesn’t see in the cards is selling Park Hill 4000. “I look forward to attending our 40th-year celebration there,” he said.