Colorado Real Estate Journal - May 6, 2015
To say that Bell Partners’ first apartment community purchase in the Denver area was a big one would be an understatement. Bell Partners, based in Greensboro, North Carolina, paid a record $255 million for a Denver-area apartment community with its recent acquisition of Horizons at Rock Creek in Superior, according to public records. It is not only the most ever paid for an apartment community in the Denver area, but also apparently is the fourth-most expensive property ever purchased in the metro area. According to research by ARA Newmark, which handled the sale on behalf of Denver-based Simpson Housing, only three properties have ever sold for more. They are: • The Wells Fargo Center, known as the “Cash Register” building at 1700 Lincoln St., which in 2012 sold for $387 million; • The FlatIron Crossing mall in Broomfield, which in 2012 sold for $323 million; and • The Park Meadows Mall in Lone Tree, which in 1998 sold for $270 million. (The Park Meadows Mall was sold again in 2004 as part of a $12.6 billion portfolio purchase by General Growth Properties, but a new deed wasn’t recorded.) The $255 million price tag for the 1,206-unit Horizons at Rock Creek, which has been renamed as Bell Flatirons, despite its size, is not the biggest apartment sale in U.S. so far this year, however. The apartment building in New York City, for example, earlier this year sold for $575 million, or $1,000 per square foot. “New York, San Francisco and possibly Chicago are about the only cities where you are likely to find apartment sales that are bigger than this one,” Hunt said. And while, according to one report, the most expensive building to sell in the first quarter of this year in San Francisco was a mere $22.38 million, multifamily buildings there command a much higher price per sf. Apartment buildings sell for far more than the $211,442 per unit that Bell paid for the Superior community. One 12-unit apartment building in San Francisco, for example, sold earlier this year for $666,667 per unit. Last year, an apartment tower in Manhattan sold for $395 million, or $556,384 per unit. “When buildings are selling for $550,000 per unit, it doesn’t take long to hit some pretty big numbers,” said Hunt, who handled the sale to Bell Partners along with fellow ARA Newmark brokers Jeff Hawks, Doug Andrews and Shane Ozment. However, it is quite the feather in Denver’s cap that a company is willing to spend a quarter-billion dollars on a single asset, according to Hunt. “It shows a great deal of confidence in Denver’s growth potential that a company would make such a big financial investment here,” Hunt said. And Bell wasn’t the only one interested in buying the property. “There were 20 competitive offers on the property given the market’s strong fundamentals,” Ozment said. Hunt said they only shopped the community to 20 extremely qualified buyers. “There are only so many groups that can write checks of this size,” Hunt said. In addition to the 20 prospective buyers that ARA Newmark approached, another five found out it was on the market and showed an interest in buying it. In fact, Bell was one of those interested parties that was not on the original list of 20. “They learned about it from a former equity partner they had on another acquisition,” Hunt said. (The deed for the purchase of Horizons at Rock Creek indicates that CH Realty, or Crow Holdings, was involved in the purchase. Crow Holdings may be Bell’s equity partner on the deal, but an official from Bell declined to discuss Bell’s relation with CH Realty.) In any case, Ozment is exactly right, Hunt said, as far as the response from potential buyers. “Of the 25 who looked at it, we received 20 offers,” Hunt said. Bell had wanted to enter the market for the past year or so, Hunt said. “Denver is one of the strongest apartment markets in the country and the purchase of Bell Flatirons provides us with an excellent opportunity to continue our strategic expansion beyond our current East Coast and Southwest markets,” Jon Bell, the president of his namesake company said last month, after the acquisition closed. “Furthermore, it is consistent with our strategy to expand our footprint into high-growth, liquid and institutionally desirable markets that have compelling economic and apartment growth fundamentals,” Bell said Despite its lofty price tag, it also is a value-add deal, given its age, Hunt said. The property was built in phases between 1997 and 1999 and was 96 percent occupied when it sold. “They are probably going to put $10,000 or so into each unit,” Hunt said. Simpson Housing already had renovated 143 of the apartment units, adding things such as granite countertops in kitchens, he said. Even if Bell spends another $10 million on the community, it will have purchased it below replacement cost, according to Hunt. “Of course, in today’s world, replacement cost is not applicable,” Hunt said. That is because Superior would never allow such a massive community to be built, he said. The community also is packed with amenities and is blessed with an unbeatable location, Hunt said. A lot of the renters work in the high-tech industry in the nearby Interlocken business park, he said. “It’s also a top choice for people who are priced out of Boulder’s housing market,” Hunt said. Loaded with amenities, it sports a 24,000-sf resort-style clubhouse, an indoor basketball court, two racquetball courts, four swimming pools and a large fitness room. “It even has an actual beach,” Hunt said. “You don’t find many beaches in Colorado.” Despite the record price, Simpson Housing really didn’t want to sell it, Hunt said. Instead, it plans to focus on its newer projects in Denver, which include the 165-unit Hartley Flats at 27th, the 114-unit Studio LoHi and the 354-unit Skyhouse, a partnership deal with Novare and Batson Cook Development. “Simpson Housing (which has no relation to the Simpson family) is overallocated as far as units in this market,” Hunt said. “They want to own and build newer stuff in Denver and the easiest way to achieve that goal and be properly allocated was to sell their biggest asset,” he said. Bob Love, CEO of Simpson Housing, admitted that it really liked owning Horizons at Rock Creek. "The sale of Horizons at Rock Creek is a bittersweet moment for Simpson Housing,” Love said after the sale. “The property has been an absolute cornerstone of our portfolio and its development and performance over the years will stand as one of our company's finest achievements,” Love said. “As we approached the 20th anniversary of our involvement with the property, the health of the Denver apartment market encouraged us to pursue of sale of this great asset so that we could focus on new opportunities in our home market of Denver,” Love said. However, he said he thinks the new owners will do a good job. “We are so happy to hand over the stewardship of the Horizons at Rock Creek to Bell Partners,” Love said. “We are confident the property will continue to excel under its management and guidance.”