DENVER | Main Development Thread #7

[TakeFive]

It feels like there's a change in the wind direction.

With a lot of projects still under construction there's lot of energy going into completing existing projects, less about starting new projects. I also wonder if there isn't a shift from mid-size projects to a few large and more smaller projects.

Ten-year bond rates bumping up against 3% may also suggest less interest in risk-taking going forward or higher cap rates on investments needed to attract capital.

[mojiferous]

Originally Posted by TakeFive

It feels like there's a change in the wind direction.

With a lot of projects still under construction there's lot of energy going into completing existing projects, less about starting new projects. I also wonder if there isn't a shift from mid-size projects to a few large and more smaller projects.

Ten-year bond rates bumping up against 3% may also suggest less interest in risk-taking going forward or higher cap rates on investments needed to attract capital.

I don't know if there is a change in direction so much as it seems that no one is even talking about half the things starting up or being proposed or built because there is just too much and most of it seems like background noise now... There are definitely things that I have seen proposed that would have previously merited discussion here but aren't interesting enough anymore.

[twister244]

Originally Posted by mojiferous

I don't know if there is a change in direction so much as it seems that no one is even talking about half the things starting up or being proposed or built because there is just too much and most of it seems like background noise now... There are definitely things that I have seen proposed that would have previously merited discussion here but aren't interesting enough anymore.

I would agree with that sentiment. Hell, you could devote a whole "infill" page just covering RiNo. I am aware of the two projects in RiNo that got canned this year (this Giambrocco dev and the Drivetrain project). There are a couple other things that have floated around in the press as either conceptual/early proposal stages that barely made a blip on here and aren't even on Denverinfill.

I will give you a couple examples:

The mixed-use project at 3060 Brighton Blvd. https://www.bizjournals.com/denver/news/2018/03/22/partnership-formed-to-develop-rino-property.html

The mixed use development that Hurley guy brought up a year or so ago.
https://www.denverite.com/250-million-plan-finally-make-rino-riverfront-29537/

The problem is trying to sift through all of this and filter out what we think actually has a good chance of getting off the ground with solid backing. Maybe Denverinfill folks are pretty in-tune with what actually is serious which is why some of these projects aren't on there. Then again, it could also be as stated above there are simply too many projects at this point to keep track of.

[PLANSIT]

^ From what I've seen, there were ~60-80 projects in the development review process within 1/4 mile of the 38th/Blake station during the last 2 years. It's staggering.

[CherryCreek]

Originally Posted by PLANSIT

^ From what I've seen, there were ~60-80 projects in the development review process within 1/4 mile of the 38th/Blake station during the last 2 years. It's staggering.

I wonder about the status of Denver Rock Drill too - another one of my faves.

[DenverInfill]

Originally Posted by twister244

The problem is trying to sift through all of this and filter out what we think actually has a good chance of getting off the ground with solid backing. Maybe Denverinfill folks are pretty in-tune with what actually is serious which is why some of these projects aren't on there. Then again, it could also be as stated above there are simply too many projects at this point to keep track of.

It is difficult to sort through it all and figure out what's a real project and what's a concept that someone is floating out there. Sometimes we take a wait-and-see approach and sometimes we just put it out there. There's just so many projects!

[Denver]

Originally Posted by CherryCreek

The Giambrocco site in Rino at 3600 Wynkoop has flipped. New owners say there are no present plans to re-develop.


https://businessden.com/2018/04/23/rino-...m_term=0_e8b1506f0c-8c9374b268-148029773

That's a good reminder that during these boom cycles so much gets thrown against the wall to see what will stick. But a lot never gets developed.

Someday.

Here's the previously (now obsolete) released plans.

I hate to say it but Giambrocco and WTC were both extremely low probability. Both projects were proposed by groups with little to no development background that seemed to value concept more that practicality (sorry but you cannot have active train tracks running through the middle of your pedestrian oriented space). I think these individuals bit off a lot more than they could chew. There are very few firms in town that could handle projects like these. The Drivetrain project on Brighton (if anyone remembers that) was the same story. "Developers" with little experience thinking they could do a $100 million project.

While I like the ambition, I think it taints the market. It shows a false flag that the market cannot handle these types of projects which is in no way true. Rather, the developer cannot hand these types of projects.

[Denver]

Originally Posted by CherryCreek

I wonder about the status of Denver Rock Drill too - another one of my faves.

That one has had a lot of false starts. From what I understand, that land owner is a very difficult person to work with...I am hopeful now that Urban Villages has been replaced with Saunders that this project will see some traction.

[TakeFive]

Originally Posted by Denver

I hate to say it but Giambrocco and WTC were both extremely low probability. Both projects were proposed by groups with little to no development background that seemed to value concept more that practicality (sorry but you cannot have active train tracks running through the middle of your pedestrian oriented space). I think these individuals bit off a lot more than they could chew. There are very few firms in town that could handle projects like these. The Drivetrain project on Brighton (if anyone remembers that) was the same story. "Developers" with little experience thinking they could do a $100 million project.

While I like the ambition, I think it taints the market. It shows a false flag that the market cannot handle these types of projects which is in no way true. Rather, the developer cannot hand these types of projects.

Thanks for the feedback; I suspected as much. There's quite a lot that will need to be absorbed over the next 24 months or so especially with respect to apartments and hotel rooms. I do anticipate Block 162 going vertical at some point and I'd guess a few more projects as well.

[CherryCreek]

Originally Posted by Denver

I hate to say it but Giambrocco and WTC were both extremely low probability. .

I always thought that WTC was more solid, given the backers and tenant commitments they have:


BOULDER — The University Corporation for Atmospheric Research and the National Renewable Energy Laboratory have agreed to set up shop at the World Trade Center Denver campus when it opens in 2019.

UCAR, based in Boulder, and NREL, based in Golden, will co-anchor The Innovation Corridor, a platform designed to connect federally funded labs with private industry to foster economic development and job creation.

https://bizwest.com/2017/05/19/ucar-nrel-co-anchor-innovation-corridor-wtc-denver/

Also, I see that developer in January just spent $2 million to close on a lot that is part of the development.

https://businessden.com/2018/01/31/strip-rino-land-nets-seller-10000-gain/

Either there is a developer who continues to throw good money after bad, or this will still likely get built.

Anyone have any updates?

[PLANSIT]

Originally Posted by Denver

I hate to say it but Giambrocco and WTC were both extremely low probability. Both projects were proposed by groups with little to no development background that seemed to value concept more that practicality (sorry but you cannot have active train tracks running through the middle of your pedestrian oriented space). I think these individuals bit off a lot more than they could chew. There are very few firms in town that could handle projects like these. The Drivetrain project on Brighton (if anyone remembers that) was the same story. "Developers" with little experience thinking they could do a $100 million project.

While I like the ambition, I think it taints the market. It shows a false flag that the market cannot handle these types of projects which is in no way true. Rather, the developer cannot hand these types of projects.

WTC is still moving through project review. It's progressing as expected.

[TakeFive]

Originally Posted by CherryCreek

I always thought that WTC was more solid, given the backers and tenant commitments they have:

BOULDER — The University Corporation for Atmospheric Research and the National Renewable Energy Laboratory have agreed to set up shop at the World Trade Center Denver campus when it opens in 2019.

UCAR, based in Boulder, and NREL, based in Golden, will co-anchor The Innovation Corridor, a platform designed to connect federally funded labs with private industry to foster economic development and job creation.

This could come down to politics. Quoting myself/Politico:

The omnibus—Capitol Hill jargon for a single spending bill that funds most government functions—does not kill any of the programs or agencies Trump’s budget proposed to kill; ... Trump wanted to slash the Energy Department’s renewables budget 65 percent; instead, Congress boosted it 14 percent.

Hard to say or know when politics is involved. Always good to remember:
"It is the duty of the President to propose and it is the privilege of the Congress to dispose." - Franklin D. Roosevelt

While I wasn't familiar with the 'developer' the landholder/partners have long-time Denver roots. Couple of thoughts:

Other than for maybe some infrastructure concerns they don't have to develop the whole enchilada at one time. I'd guess that office space may be more feasible; not sure how much space NCAR or NREL were going to take and it may still be doable; obviously it's more of a letter of intent at this point. If they could generate some additional tenant interest that could be Yuge.

It's also possible they could sell a piece of the project to somebody else or bring in additional equity partners if needed; still early in the process.

[Denver]

Originally Posted by CherryCreek

I always thought that WTC was more solid, given the backers and tenant commitments they have:


BOULDER — The University Corporation for Atmospheric Research and the National Renewable Energy Laboratory have agreed to set up shop at the World Trade Center Denver campus when it opens in 2019.

UCAR, based in Boulder, and NREL, based in Golden, will co-anchor The Innovation Corridor, a platform designed to connect federally funded labs with private industry to foster economic development and job creation.

https://bizwest.com/2017/05/19/ucar-nrel-co-anchor-innovation-corridor-wtc-denver/

Also, I see that developer in January just spent $2 million to close on a lot that is part of the development.

https://businessden.com/2018/01/31/strip-rino-land-nets-seller-10000-gain/

Either there is a developer who continues to throw good money after bad, or this will still likely get built.

Anyone have any updates?

I’m hopefully- just not optimistic of the project. At least not as it is currently designed. It will need some serious VE’ing. Anyone know if they have a debt placement yet? I can’t imaging they will be able to get anything without either a recopurse loan (and someone with very deep pockets to make the gurentee) or some pretty serious preleasing.

[SnyderBock]

They have broke ground at the massive Broadway Station TOD. This is probably the Biggest TOD since Union Station neighborhood. Looks like a couple dozen mixed use mid-rises. With lots of pedestrian enhancements and riverfront parkway improvements.

[twister244]

That's awesome. The Broadway project is one I keep forgetting about. Do we know which part of it is going up first? I haven't been following this one closely so not familiar with the gritty details.

It appears things are slowly moving forward with the RiNo promenade park - https://www.denverite.com/rino-park-track-construction-year-50952/

[wong21fr]

Originally Posted by twister244

That's awesome. The Broadway project is one I keep forgetting about. Do we know which part of it is going up first? I haven't been following this one closely so not familiar with the gritty details.

It appears things are slowly moving forward with the RiNo promenade park - https://www.denverite.com/rino-park-track-construction-year-50952/

Can't imagine that it's anything past additional site remediation and some of the initial infrastructure. If anything is actually going vertical at this time I would be highly surprised.

[CherryCreek]

The Denver housing market continues to astound and relentlessly soars ever higher in value.

I really expected a slow down if not a "mini" bust by now, but all trends seem to be in the opposite direction.

Two recent articles:

Today, the Denverite notes that Denver is bucking a trend where even historically "redlined" neighborhoods with heavy minority residents are soaring in value.

https://www.denverite.com/despite-nation...ormerly-redlined-areas-gone-value-51051/

This quote is shocking, if true:

What we have been seeing is that it’s a seller’s market because there’s not much inventory,” Denmon said. “In the normal buyers’ market, there are about 25,000 homes listed. Currently, there are around 2,700 houses on the market in the whole state of Colorado.”

And yesterday the Denver Post noted that, if anything, the brief slowdown in prices we saw in 2016 and 2017 is now a distant memory and prices seem to be accelerating.

https://www.denverpost.com/2018/04/24/metro-denver-home-prices-accelerate/

Killer quote:

The Denver home price index measured an 8.4 percent annual gain in February, up from a 7.6 percent increase in January and a 7.4 percent increase in December. The February pace tied with Detroit for fourth highest and was behind only Seattle, Las Vegas and San Francisco, which all saw double-digit gains. Nationally, home prices are up 6.3 percent year-over-year in February.


Stunning numbers. It will be interesting to see if the huge inventory of apartments coming on market this year slows or lowers rental prices which, perhaps, in turn impacts housing prices as renting becomes the clear preference in an "overpriced" market (if it is overpriced).

Or maybe we are reaching a new paradigm in Denver that looks a lot more like San Francisco -for good - than the sleepy cow town of years past.

Edit: I see this story from Westword that now metro rents are soaring year over year, with Denver city rents up 15.7% year over year. That's nuts.

http://www.westword.com/news/metro-denver-rent-prices-april-2018-10187834

[TakeFive]

Originally Posted by CherryCreek

https://www.denverite.com/despite-nation...ormerly-redlined-areas-gone-value-51051/

What we have been seeing is that it’s a seller’s market because there’s not much inventory,” Denmon said. “In the normal buyers’ market, there are about 25,000 homes listed. Currently, there are around 2,700 houses on the market in the whole state of Colorado.”

And yesterday the Denver Post noted that, if anything, the brief slowdown in prices we saw in 2016 and 2017 is now a distant memory and prices seem to be accelerating.

It's not just in Denver.

Why High-Flying U.S. Home Prices Seen Getting Another Jolt
April 25, 2018 by Vince Golle/Bloomberg

Inventories of previously owned homes are plumbing the lowest levels in at least 19 years, a key reason why resilient demand by itself has fueled price appreciation that’s extending to the new-homes market. Now, with the costs of lumber and other building materials soaring together, buyers are unlikely to see any relief for some time.

Mortgage rates surge to highest since 2013
Apr 26, 2018 By Andrea Riquier/MarketWatch

PulteGroup Doesn't Seem Too Worried About Rising Interest Rates
Apr 25, 2018 by Tyler Crowe/Motley Fool

Robust buyer demand in the face of mortgage and financial market volatility attests to the strong underpinnings of this housing recovery which is being bolstered by sustained economic growth, good job trends, favorable demographics and a limited supply of homes for sale.

With respect to Denver a lot of people/renters making good bank and (who want to stay) have been pressing to buy. That's why many traditional 'no-so-good' neighborhoods are subject to Gentrification whether city or suburb.

On a national scale this could be a bit of a 'tax-cut' bubble that is shorter-lived.

[TakeFive]

Originally Posted by CherryCreek

It will be interesting to see if the huge inventory of apartments coming on market this year slows or lowers rental prices which, perhaps, in turn impacts housing prices as renting becomes the clear preference in an "overpriced" market (if it is overpriced).

Edit: I see this story from Westword that now metro rents are soaring year over year, with Denver city rents up 15.7% year over year. That's nuts.

http://www.westword.com/news/metro-denver-rent-prices-april-2018-10187834

A slow deluge of new apartments have to be a positive; how much is hard to say.

There's likely a lot of noise in metro Denver rents going up. Over the last 2-3 years there's been more suburban apartment construction. They automatically set new higher rental rates. The other likely even bigger issue is there's been a lot of Big Investor 'value-add' buys. Once renovated rental rates can soar in older units. But picture an ongoing process that plays out over a few years in dribs and drabs but still makes an outsized increase on rents for a market trending higher in the burbs, similar to but lagging what has happened in the city's center.

On a political note
AZ/Phoenix voters passed a higher minimum wage much to the chagrin of conservatives/legislature. First to $10/hr then $10.50 this year. Interestingly, even in low-cost Phoenix, restaurants (for example) start at $12 and with some experience you get $15/hour. Much the same for retail. Tight labor market combined with tax cuts is definitely making a difference. Whether this causes inflation heartburn... too early to say.

[twister244]

Yeah, the housing prices are going up still. However, rent I feel like is a mixed signal. My rent didn't go up here in RiNo last year, and it's not going up again this year. So I feel like if there are significant rent increases, it may be in other types of units, or the suburbs as mentioned above.