Colorado Real Estate Journal - June 1, 2016
Stephen Caragol’s The Edge at City Park LLC bought land near City Park in Denver a number of years ago. A year ago, the developer built a five-story, 29-unit luxury apartment building on the site at 1855 Gaylord St. Steamboat Springs-based Caragol, through The Edge at City Park LLC, recently refinanced the condo-quality rental property in an $8 million recourse loan. The loan was arranged by Catherine Murphy of Chase. The seven-year, fixed-rate loan has an interest rate of 3.67 percent and is amortized over 30 years. It was by far the largest of a handful of loans for a total of about $19.5 million recently arranged by Murphy. “We chose Chase Bank because they offered the best interest rate,” Caragol said. “We could also work with them without a loan broker representing us, so that saved us some money,” he added. In addition to the low costs, he said he was pleased with the service he received from Murphy. Since he wasn’t represented by a broker, how did he end up using Chase and Murphy? “Well, a couple of years ago, we talked to Chase about doing the construction financing,” he said. “But they weren’t really buying into our idea of larger units, as they were more interested in financing new buildings with smaller units,” Caragol said. A typical unit in The Edge at City Park is about 1,390 square feet, almost twice the size of a typical unit in many new buildings. “It depends on the unit, but we are probably averaging about $1.95 per square foot in rent,” he said. “That is a lot lower than the new construction market,” he said, although the monthly rents are similar to many of the newer buildings with smaller units. While Chase initially saw the large units as a weakness, a year after opening it saw the size as a strength, he said. “We don’t have as much competition for these units, so when we went to refinance our loan, Chase was very excited,” Caragol said. Also, Chase was impressed by the quality of the design and construction. The building was designed by Eric Smith & Associates from Boulder and it is managed by Cornerstone. “This is a really high-end property,” Caragol said. “They were really built in a condo style even though they are rentals,” he said. “They are condo-quality,” he said. The units not only have high-end finishes, but also the construction is so solid that the units are basically soundproof. “One guy plays his grand piano in his apartment all of the time and none of his neighbors can hear him,” Caragol said. Renters also are guaranteed that their views will be preserved because the development was grandfathered under the previous zoning that allowed five stories, he said. A maximum of three stories is now allowed in the immediate area, he said. He said if construction defect legislation was reformed, “You could turn these into condos instantly, if you wanted to.” However, the Chase financing carries pretty hefty prepayment penalties and it does not allow the units to be converted into condos, he said. “Since you are not allowed to convert them into condos, all you can really do is refinance your debt,” Caragol asid. “But at some point, this entire condo lawsuit mess will be passé and, when that happens, small, infill buildings like this one will be great candidates to be turned into condos. It’s too risky and expensive today, but that won’t always be the case.” Meanwhile, details of other transactions recently arranged by Murphy include: • A $4 million recourse loan with Brad Peterman to refinance a 50-unit apartment community at 7822-7952 Oberon Road in Arvada. The five-year, fixed-rate loan has an interest rate of 3.34 percent and is amortized over 30 years. • A $2.94 million recourse loan with Lakewood Apartments LLC to refinance a 44-unit apartment community at 9890-9892 W. 26th Ave. in Lakewood. The seven-year, fixed-rate loan at 3.76 percent is amortized over 30 years. • A $2.4 million recourse loan with Lloyd’s Apartments LP for the refinance of a 33-unit apartment complex at 1360 Williams St. in Denver. The seven-year, fixed-rate loan at 3.61 percent is amortized over 30 years. • A $2.12 million recourse loan with Hokkaido LLC for the refinance of a 21-unit apartment complex at 1760 Pearl St. in Denver. The three-year, fixed-rate loan at 2.99 percent is amortized over 30 years. • A $1 million nonrecourse loan with McElroy LLC for the refinance a 19-unit apartment building at 967 Marion St. in Denver. The adjustable loan follows the 12-month Treasury average index with a start rate of 2.63 percent. This loan is amortized over 15 years • A $750,000 nonrecourse loan with Freddy’s Family LLC for the refinance of a 21-unit apartment complex at 800 Ogden St. in Denver. The five-year, fixed-rate loan at 3.23 percent is amortized over 30 years. • A $620,000 recourse loan with Highland Vista LLC for the refinance of a 12-unit apartment complex at 3151-3165 Eliot St. in Denver. The five-year, fixed-rate loan at 3.61 percent is amortized over 30 years. Other News Montegra Capital Resources Ltd. recently funded a $1.86 million loan for land in Cherry Creek North. The loan was made to a developer who purchased four contiguous parcels of land from three separate sellers. The developer plans to build 29 condos on the property. There currently are single-family homes and rental duplexes on the property. Montegra, a Denver-based private money bridge lender, was able to fund the loan in fewer than three weeks. Michael Salzman and Ed Boxer of Essex Financial Group recently arranged a $7 million nonrecourse loan for a 52,382-square foot retail property called Cerritos Center, in Cerritos, California.