Colorado Real Estate Journal - March 18, 2015
A Canada-based apartment investment company recently made its first Denver acquisition. Brass Enterprises Inc., based in Toronto, paid about $67.9 million for the 328-unit Lugano Cherry Creek apartment community at 9655 E. Iliff Ave. The seller was Dallas-based GenCap Partners. The community was built in 2010. There was a lot of interest in the property from prospective buyers, said Jordan Robbins, a director with the Denver office of HFF. He handled the transaction with fellow HFF team members Jeff Haag and Jared Buffington. “We ended up getting seven or eight offers,” Robbins said. “There were a bunch of out-ofstate institutional investors, as well as local groups, interested in it,” he said. Indeed, the ultimate buyer was not only outside of Colorado, but outside of the U.S. “Brass had been looking at Denver from about the middle of last year and really honed in on this property,” Robbins said. Brass expects an internal rate of return of 15 percent to 20 percent on its acquisitions, but often exceeds that, according to its website. It has invested heavily in Toronto, but is aggressively looking to grow its multifamily portfolio in Canada and in fast-growing parts of the U.S., such as the Sunbelt, stretching from Florida to California. “Some extend the definition of the Sunbelt to include Denver” and other cities, according to the company. In the U.S., Brass has purchased properties in South Florida and Austin, Texas. Its apartment community in Austin is minutes from Dell’s corporate headquarters and close to a new regional headquarters that Apple is building. Lugano is exactly the kind of product that Brass wants to own, Robbins said. “They really liked the high-end finish levels,” Robbins said. “They also like that is has a bit of a value-add component,” he said. “They will spend some money finishing up some of the upgrades that the seller started. It’s in good shape, but they will bring it to the next level.” Brass also liked that the average unit size was a bit over 1,000 square feet, he said. “That sets it apart from most competitors in the area,” he said. Brass also likes its southeast location and the difficulty competitors would have finding ground in the area for future development, he said. Lugano is on the northwest corner of East Iliff Avenue and South Emporia Street in the East Cherry Creek submarket. The community has two fourstory buildings that include ground-floor retail and structured garage parking. Units include one-, two- and three-bedroom options averaging 1,025 sf each. Approximately 95 percent occupied, the community offers amenities such as two interior courtyards, 1.5 acres of green space, a club room and lounge area, resortstyle swimming pool with heated sun deck and views of the Rocky Mountains. Brass paid $207,000 per unit for Lugano. “It is a wrap construction, so they probably paid a bit below the replacement cost, if you were going to build it today,” Robbins said. He said Lugano was Gencap’s only asset in Denver. “They built it,” Robbins said. “They held it after it was stabilized, because when it was stabilized, it wasn’t a good time to sell it. Obviously, now is a great time to be putting projects on the market, as there is far more demand than there is supply available.” HFF also secured the financing for Brass. HFF arranged a seven-year, 3.45 percent fixed-rate acquisition loan through Freddie Mac’s CME Program. The securitized loan will be serviced by HFF through its Freddie Mac Program Plus Seller/ Servicer program. HFF previously arranged financing for the property on behalf of Gencap in 2012. The HFF investment sales team representing the seller was led by Managing Director Josh Simon and Real Estate Analyst Matt Gangaware.