Colorado Real Estate Journal - May 6, 2015

HFF arranges $40M loan for Broadstone Gardens apts.

Eric Tupler and his team in the Denver office of HFF recently arranged a $40 million loan on behalf of J.P. Morgan Asset Management for the recently opened Broadstone Gardens at Cherry Creek.

The Class A community, which is LEED Gold certified, has 191 units.

The community, at 225 S. Harrison St., was completed late last year by Alliance Residential.

Originally, it was to be part of a for-sale condo project by veteran Denver developer Mickey Zeppelin. When the recession hit, and the condo market’s bottom fell out, Zeppelin sold the property to Alliance.

“Originally, it was a joint venture between Alliance and J.P. Morgan,” Tupler said.

“But now J.P. Morgan owns it outright,” Tupler said.

He said he believes J.P. Morgan also paid off the construction loan when it bought out Alliance.

“J.P. Morgan owned it free and clear; it was unencumbered,” Tupler said.

Typically, when developers form a joint venture with an institutional partner like J.P.

Morgan, there is language in the agreement that allows one partner to buy the other out.

“That is pretty standard,” Tupler said.

Tupler, whose team included Leon McBroom in Denver and two HFF officials from New York City, placed the loan with Wells Fargo.

“There was a huge amount of interest in this loan, not only from banks, but from life insurance companies too,” Tupler said.

J.P. Morgan wanted the flexibility and short-term financing that typically only banks can provide, he said.

The loan not only has a very low interest rate, but if J.P. Morgan decided to sell it, after 2 ½ years, there is no prepayment penalty, he said.

Even if J.P. Morgan, which has more than $82 billion in assets under management worldwide, decides to sell it earlier, the penalty is much smaller than a typical yield maintenance, he said.

J.P. Morgan is so bullish on the community, it sought the financing even before Broadstone Gardens was fully stabilized.

“A lot of times, owners want the property to be a bit more seasoned,” before going out to the market, to get the best terms possible, Tupler said.

In this case, Broadstone Gardens had everything going for it, Tupler said.

“It really was the perfect alignment of factors,” Tupler said.

“It’s a fantastic property in a fantastic submarket,” Tupler said. “Cherry Creek is probably the hottest submarket in Denver for apartments. You're walking distance to the Cherry Creek shopping center and it is an easy drive to either downtown or the Denver Tech Center. The household incomes and demographics in the area are incredible.” Also, Alliance did a great job in developing it, he said.

“It was well designed,” Tupler said. “It even includes some townhome-style units. It’s built to the standards of the condos that Mickey (Zeppelin) planned.

In fact, if you look at an aerial photo, you can see one of the buildings on the property is a condo tower that Mickey built.

The apartments and the condos actually share a parking garage.” In addition, there is the owner.

“J.P. Morgan is as financially as strong as you get,” Tupler said.

“When you look at everything going for it: great construction and design; a fantastic location; and a incredibly financially strong owner, you really have all of the elements for the type of property that lenders dream about.”