It was a blockbuster deal.
American Realty Advisors last month paid $154.3 million for the 314-unit, Elan Union Station, according to public records.
American Realty Advisors is rebranding the community on 2.4 acres at Chestnut Place and 20th Street as ALARA Union Station.
It was the most expensive apartment sale ever in downtown Denver’s central business district, although it was eclipsed by another recent sale, the $210 million paid for the 696-unit Uptown Square, at the edge of downtown, according to Cary Bruteig, principal of Apartment Appraisers & Consultants.
And perhaps even more impressively, it was by far the most ever paid on a per-unit basis for an apartment community, according to Bruteig.
The price paid per unit was a whopping $491,401, if you simply considered the total number of units.
Of course, that is not a fair way to calculate it, as the sale included about 58,000 square feet of retail, including the 46,631-sf King Soopers, the first full-service grocery store in Lower Downtown.
If you used a back-of-the envelope calculation and subtracted $20 million for the King Soopers, the price per unit would still be an amazing $427,707 per unit.
“This probably is the most core deal to ever trade in Denver and in this cycle. It is about as core as it gets in Denver,” said Jordan Robbins, who marketed and sold the recently completed community along with fellow Holliday Fenoglio Fowler broker Jeff Haag.
The seller was a partnership that included Greystar and its equity investors, Goldman Sachs.
“It’s a brand-new building, packed with high-end amenities in an area with very good demographics,” Robbins said.
While retail is not necessarily a plus when selling an apartment building, it definitely was an asset.
“The King Soopers was important, but it was not the driving force,” in the sale, according to Robbins.
“The driving force was the great location by Union Station, the quality of the construction and all of the high-end amenities,” he said.
That’s exactly right, according to Scott C. Anderson, director of investment for American Realty Advisors.
“Over the last several years, this submarket has become one of the most desirable urban locations within Denver due to its proximity to the downtown employment center, as well as the developing cultural core of the city around LoDo and Union Station,” Anderson said.
He said the property’s residential units were built to luxury specifications, with bamboo floors, quartz countertops with tile backsplashes, undermount sinks, and stainless steel appliances.
The building also sports a state-of-the-art fitness center, two interior courtyards featuring a resort-style pool, stainless steel grilling stations, a bocce ball court, a large outdoor fireplace, a resident lounge, two private offices, a large, fully connected conference room, a pet spa, a bicycle and ski maintenance shop with lockers, and bike wash.
Robbins noted that residents have access to the King Soopers by a private, “residents only” elevator providing direct access to the ground-floor grocery store.
“This property is an ideal addition to our core multifamily portfolio, according to Scott E. Anderson, American’s senior portfolio manager for its multifamily division.
“The asset’s great location in a key market, its best-in-class amenities and its strong retail component are three factors that we believe will provide our investors with an attractive current income stream,” he added.
Denver city leaders have wanted a grocery store like King Soopers in downtown for decades.
The Denver Urban Renewal Authority in fact, invested $1.5 million to bring the King Soopers to the site, noted Tracy Huggins, executive director of the Denver Urban Renewal Authority.
“If you look in terms of the entire project, it was a fairly nominal TIF (tax-increment financing) investment,” Huggins said.
“It was primarily for the parking and alley reconstruction,” needed to accommodate the King Soopers, she said.
Other retail tenants include Wells Fargo, Pig & The Sprout and Kriser’s Natural Pet.
American Realty Advisors, with more than $7.3 billion in commercial real estate assets under management, outbid a number of competitors for the community
“We had a lot of interest,” Robbins said. “It was highly sought after. We had buyers from California, the Midwest and back East, as well as local groups interested in it.”
He said they even received a few offers from European companies, which were looking to buy it with U.S. partners.
He said that prospective buyers liked it not only because of Denver’s economy and the strength of downtown, but because of Union Station, which now provides train service to Denver International Airport.
“I think people really liked the story at Union Station,” Robbins said.
John Winslow, principal of Winslow Property Consultants, wasn’t involved in the sale, but follows Denver commercial real estate closely.
“This is a trophy investment and there will always be demand for this product similar to there will always be demand for $2 million houses and up,” Winslow said.
“The folks moving into this development have north of $100,000 jobs and ages range from 27 to 45,” he added.
“It would be a great place to live for a younger person or even an old guy like me,” Winslow quipped.
While the sale represents a record price, it may be the first of a new breed of downtown apartment communities for selling for prices that continue to soar into the stratosphere.
“There is a decent amount of new construction in downtown, and I would expect at some point those buildings will trade” at what could even be at higher prices, Robbins said.