Westwood Crossing enjoys hard-fought success

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Westwood Crossing Apartments required the completion of 17 different applications for the zoning, financing, low-income housing tax credits and grants to make the project a reality.

Rodger Hara
Principal, Community Builder Realty Services

The southwest corner of South Irving Street and West Alameda Avenue in Denver was once occupied by a neighborhood bar, inside which lived the goal posts that stood in the south end zone of Mile High Stadium the first time the Broncos went to the Super Bowl in 1977.

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Today, the bar is gone, the goal posts are probably in someone’s man cave and the site is home to a 98-unit apartment building occupied by families of low and moderate incomes below 60 percent of Denver’s area median income ($53,940 for a family of four).

Developed by McDermott Properties, the Westwood Crossing Apartments cost nearly $23 million, took almost three years to plan, develop and build, and required the completion of 17 different applications for the zoning, financing, low-income housing tax credits and grants.

Arthur McDermott, a veteran apartment developer and manager, was co-founder of McDermott Stein and Ira, the organization that became Aimco. Venturing into affordable housing 20 years ago, his company has developed over 2,800 units – and sold some of them – from Fort Collins to Colorado Springs. A related company, ComCap Management, manages over 2,600 units along the Front Range including the remaining portfolio as well as for third-party properties.

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The saga of Westwood Crossing began 25 years ago when the Denver Urban Renewal Authority created the Westwood Urban Renewal Area. One of the poorest neighborhoods in Denver, Westwood was the beneficiary of the sale of tax-increment financing bonds then. By 2013, DURA had TIF funds that had to be spent in the neighborhood or they would revert to the city’s General Fund for use anywhere in the city. Recognizing that the neighborhood could still benefit from those funds, DURA engaged Economic and Planning Systems to evaluate how those funds could best be deployed. EPS identified ways to use the money for commercial upgrades and improvements and vacant land where scalable housing could be developed.

McDermott had established a solid working relationship with DURA on development of his Dahlia Square Senior Apartments in Park Hill, so when EPS approached him about the opportunity in Westwood, he was intrigued. He put a contract on the site at Irving and Alameda and embarked on a journey that was to take three years.

Gaining site control was probably the easiest part of the entire transaction. Fortunately, the sellers had been holding it for several years without being able to develop or sell it, so they were extremely patient.

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The challenges rolled on from there. First, the site was zoned Mixed-Use-3 and would have accommodated 75 units under that zoning. DURA wanted a bigger bang for the $4 million it was willing to put into the project and asked for more units. Rezoning to MU-5 would allow more units, and to make that happen, support from Councilman Paul Lopez was essential. Councilman Lopez was willing to provide that support but in return wanted to see a higher income project that incorporated commercial space with job creation potential. Balancing the site design, unit mix, affordability mix, parking requirements and commercial space resulted in a 98-unit project with 5,000 square feet of commercial space.

Arthur McDermott

Four occupied houses on the site being rented by the seller to low-income families posed another challenge. The use of DURA funds necessitated relocation of those residents following the requirements of the federal Uniform Relocation Act, even though no federal funds were being used at that time. That act requires payment of the rent differential between the current rent and the rent necessary to place the relocated families into comparable housing and paying for moving costs.

The topography of the site added to the challenge mix with a 16-foot drop from its northwest to southeast corner. And just to spice up the mix, there were fiber-optic cables and other transmission lines that ran on poles down the middle of the site that had to be relocated and buried in the street.

A $100,000 surprise emerged during excavation when a large quantity of asbestos tiles was discovered buried on the site, resulting in a big hit to the contingency reserve for removal.

The city’s parking requirements necessitated making some of the spaces tuck-under at the rear portion of the building, the footprint of which is an “L” shape with the longer part of the L running east and west along Alameda and the shorter leg north and south along Irving. From the north, the building is four stories tall with angled balconies inspired by a design that McDermott saw while on vacation in Mexico. From the southeast, because of the topography, the end of the short leg is five stories high.

DURA also required that a portion of the development budget be used for public art on the exterior of the building. A design competition was held among neighborhood artists, which resulted in a large, multicolored mural gracing the east end of the building.

In spite of the time the project took and the many applications for zoning, issuance of the bonds by CHFA, tax credits from CHFA, construction and permanent financing, building permit, funds from DURA, the city and county of Denver, Colorado Division of Housing and equity investment, development of the project was still worth it. When asked if he would do it again, McDermott said, “Absolutely! The Westwood neighborhood desperately needed quality affordable housing and the neighborhood support was encouraging. Most important was the support by the city of Denver, the state of Colorado, DURA, CHFA and our investor and lender partners. It made for a winning team and I was proud to be part of it.”

Featured in CREJ’s November 2018 Multifamily Properties Quarterly

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