Colorado Real Estate Journal -
When Penterra Plaza Partners LLC recently bought the 32 remaining luxury units at the Penterra Plaza in the Denver Tech Center, the sales price was not disclosed. “We have a confidentiality agreement that prohibits us from releasing it, but it will be a matter of public record,” said Peter Niederman, CEO of Kentwood Real Estate and one the equal partners in Penterra Plaza Partners LLC who bought the units from Simpson Housing LLC. Niederman’s partner is Frank Hutto, an oil executive and investor. Records show that Simpson sold the units for a total of $8.05 million. Rather than being sold for one price as a portfolio, each unit had its own sales price. The units sold from $151,100 to $400,590, with a 1,724-square-foot retail space on the ground floor selling for $50,000, according to the document fees recorded for each transaction. The new owners plan to rent some of the units as apartments and sell the others as condominiums. The breakdown of sales versus rentals is still being determined. Units for lease at Penterra Plaza will have monthly rental rates of $1,600 to $4,000. Condo units will be priced from $300,000 to $1 million. The purchased units have a total of 60,573 of finished square feet. The purchase price equates to $132.41 per sf. It includes nine penthouse units. The retail space on the high-rise development’s first floor includes a McCormick & Schmick’s Seafood Restaurant. The retail space purchased in the acquisition will house DenverRental.com, a full-service leasing assistance and property management company. The lender was Steele Street Bank & Trust. “It sounds like a really good deal,” said a real estate official familiar with the property, who spoke on the condition that he not be identified. “Steele Street Bank is a very conservative bank and it would not have loaned the money unless it thought it low-risk.” Niederman said he and Huto put 30 percent down. “We went to six banks and all six of them wanted to lend us money,” Niederman said. “They all gave us term sheets and the rates were all very attractive. We received a phenomenal rate from State Street. They were great to work with. Some people say banks are not lending on real estate. But this deal demonstrates there is money available for the right property.” He declined to name the interest rate and Peter A. Smith, an assistant vice president at State Street who handled the transaction, did not return a call. Brian Wilkinson, president of Steele Street, had this to say in a statement: “We are excited to provide financing for this terrific opportunity and to be associated with Mr. Niederman, Mr. Hutto, and Penterra Plaza Partners LLC.” “This is just a wonderful, wonderful opportunity,” Niederman said. “I couldn’t be more pleased. This is a Class A project in a Class A location and in my opinion, just one of the most beautiful projects around.” Penterra Plaza was built in 2003 and includes 266 residential units, a seven-story office building, a three-story underground parking garage, and 21,310 sf of retail space. Hensel Phelps of Greeley was the general contractor when it was constructed, Niederman said. Chuck Gargotto, a real estate broker in Kentwood’s nearby Tech Center office, handled the sale to Penterra Plaza Partners. In about 2008, Gargotto had been listing units for Simpson Housing, but Simpson later took them off the market when the condo market soured. “These units have never been occupied,” Niederman said. They also were not for sale as a portfolio, he said. “They weren’t on the market,” Niederman said. “Simpson had pulled off the remaining unsold units and I was familiar with them because of our listing history. They had interviewed several companies about listing the units in about 2007 or 2008 and they chose Kentwood. I reached out to Simpson to see if they would be willing to sell. I probably made my first inquiry a year ago.” Even though Niederman heads a residential real estate company, one of the driving forces of the purchase was the strength of the apartment market. The overall vacancy rate for the metro area was 5.4 percent in the fourth quarter, according to the Apartment Association of Metro Denver, but it was a mere 4.1 percent along the Denver southeast corridor. “We think our timing was perfect,” Niederman said. “There is a huge demand for rentals. At the same time, we have this historically low inventory of ‘for sale’ product. This is new product that wasn’t on the market. We’re still looking at what the breakdown should be between selling and renting. We might test the market to see where the interest is between renting and selling luxury condos.” If there is incredibly strong rental demand, and little interest in selling units as condos, he said one strategy could be to rent them and as an exit strategy, sell them as condominiums when market conditions for condos are stronger. “The market will tell us what to do,” Niederman said. Niederman said he has bought apartment buildings in the past, but Penterra Plaza was by far his largest deal. “I had bought some apartment buildings in the ‘80s and later sold them, but nothing of the nature and the size of this deal. “To tell you the truth, I would have been very nervous about this deal two years ago, but not today. Our unemployment rate is below the national average, our economy is growing and the rental market has never been stronger. Those factors make me very bullish about Denver real estate and very optimistic about our prospects at Penterra Plaza.” Would he consider another purchase? “Absolutely. There has never been a better time to buy investment real estate in Denver.”