Colorado Real Estate Journal - July 15, 2015
The Denver office of Holliday Fenoglio Fowler LP recently arranged an $89.5 million construction loan for A Block @ Union Station. The A Block is a 310,055-square-foot hotel, office and retail mixed-use development in downtown Denver’s Union Station neighborhood. Continuum Partners LLC worked with HFF to place the four-year construction loan with Wells Fargo and Boston-based CrossHarbor Capital Partners. Continuum also raised $14.5 million in equity from more than 20 investors in addition to contributing the land to the project. A Block @ Union Station broke ground in April. When it is completed in November 2016, it will include: • A 12-story, 200-room hotel managed by Kimpton; • A five-story, 45,458-sf office building along with about 13,000 sf of retail/restaurant space; and • A 197-space subterranean parking garage with 100 spaces dedicated to public parking. The boutique hotel will have 9,000 sf of meeting space, a 110- seat Kimpton restaurant and a 201-seat signature restaurant that will be announced soon. The office property will connect to the hotel with a third-floor skybridge and will have opportunities for signage for multiple tenants. Both properties will have ground-floor retail with Bank of America already under lease for 3,496 sf of space. A Block @ Union Station is at the corner of 16th and Wewatta streets, adjacent to the RTD Commuter Rail Transit Platform. Next year, it will provide direct rail service to Denver International Airport. This places the property within the Union Station urban redevelopment project in Denver's Lower Downtown and Central Platte Valley submarkets. “Continuum Partners has been at the center of the entire Union Station redevelopment project since it began in 2005,” said Mark Falcone, CEO and founder of Continuum Partners. “This financing allows one of the most iconic development sites in the neighborhood to move forward," Falcone said. S e n i o r M a n a g i n g Director Eric Tupler and Associate Director Leon McBroom led the HFF debt placement team. "The Union Station urban redevelopment project is perhaps the most highly anticipated and transformative event to occur in Denver's core in the past century, and once complete 200,000 trips per day are expected out of the station, with A Block at the center of it all," Tupler said. Tupler said a number of lenders were interested in financing the project. “There was interest from both first mortgage lenders on the bank side and subordinated lenders,” Tupler said. In this case, CrossHarbor provided the mezzanine financing, he said. Wells Fargo and CrossHarbor liked everything about A Block @ Union Station, he said. “They loved the location, they loved that specific mixed-use components and the strength of the sponsorship,” with Continuum Partners, he said. “It was kind of the perfect storm,” Tupler said. “You had this great location, this great developer and this great mix of uses that are really ideal for the site.” Typically, lenders prefer a mixed-use development, even when a specific asset class, such as multifamily, has been extremely strong, he said. “Lenders typically like the mix, because if one asset class is struggling at a given point in time, they can often mitigate their risk by having another asset class that is performing well,” Tupler said. “Different product types typically operate a bit independently of each other,” he said. While they like the diversity, mixed-use developments often are complex creatures to finance, he said. “One challenge is often how to allocate the costs over multiple product types,” Tupler said. In the case of A Block @ Union Station, it was helped by an efficient design. “It really felt like two separate buildings that have a connection with a common garage,” Tupler said. “So although it is mixeduse, the components really can operate independently of each other,” which means the hotel, offices and retail provide synergies with each other, but also stand on their own feet, he said. Tupler said he began working on the financing about a year and a half ago. “Interestingly, I would say in that 18-month period, market conditions generally improved,” Tupler said. “There were a couple of sales of office buildings that traded at very high prices and there was a lot of activity in that Union Station area. The opportunity to be part of the whole Union Station redevelopment is pretty attractive. And Union Station will only get better, with the DIA train being operational next year and when all of the apartments in the area are completed and more people are living downtown.”
In another HFF deal, its Denver office recently secured $45 million in financing for the Parc at Cherry Creek, a 408- unit, garden-style apartment community in Denver. HFF worked on behalf of PCC Partners LLC and Iron River Management LLC to secure the 10-year, 3.89 percent, fixed-rate loan with five years interest only through Freddie Mac’s CME Program. The securitized loan will be serviced by HFF through its Freddie Mac Program Plus Seller/Servicer program. The Parc at Cherry Creek offers three floor plans ranging from 782 to 1,089 square feet. Community amenities include a 24-hour fitness center, pool and spa, gas grills in the pool area, tennis and basketball courts, sand volleyball court, DVD library, clubhouse, detached garages, gas fire pit and Internet café with Wi-Fi. Park at Cherry Creek is on almost 20 acres at 7555 East Warren Drive in southeast Denver. The community is within walking distance to retail shops, restaurants and Cherry Creek Country Club, and is about 7.4 miles from downtown Denver. Managing director Josh Simon and real estate analyst Kristian Lichtenfels led the HFF debt placement team representing the borrower. “Given that we are witnessing the sunset of the currently favorable interest rate environment, it’s smart business for our team to make this move,” said Jonathan Ringham, manager of PCC Partners LLC and president of Iron River Management LLC. “Locking in this low rate for the next decade provides enormous flexibility in our future operations,” Ringham said. “HFF was instrumental to us as a partner in getting this deal done from beginning to end.” FirstBank, Colorado’s largest locally owned bank, recently provided an $8.95 million financing package to Tim White and Doug Decker, principals of The Move LLC. White and Decker will use the funds to develop “The Move,” a 50,000-sf office at building at 202 Sixth St. in downtown Castle Rock. The project, which will be built by the White Construction Group, will include a below-ground parking garage and several energy-saving features, including 8,646 sf of solar panels. “We’ve managed construction projects across the Rocky Mountain Region for 30 years, and have always preferred to partner with other Colorado-proud companies to make buildings like ‘The Move’ a reality,” said White, founder and president of White Construction Group. “FirstBank has a long history of supporting businesses across Colorado, and the company has been a great partner to us during this process,” White said. The financing package will allow White Construction Group to build the first-of-its-kind office building in downtown Castle Rock. The Move is being designed by Barker Rinker Seacat Architecture. The Move will feature multiple overhead doors, effectively bringing the outdoors into the building, and modern, energy-efficient mechanical, engineering and plumbing systems to provide lower energy consumption. It also will have 74 parking spaces with bicycle parking and a large, open office floor plan. The development will be the first building in downtown Castle Rock to feature solar panels. The solar panels will offset about 20 percent of the building’s electric energy consumption.