DENVER | Main Development Thread #6

[enjo13]

Originally Posted by Brainpathology

I would imagine the lack of condo construction in Denver ranks in voter's minds right below finding affordable dog food...

Affordable housing in the city is a HUGE issue for everyone I know. If the issue is cast as "condo defect reform" sure you're not going to get a lot of support. Make the case that the lack of condo construction in Denver (easy to make) is directly caused by these defect laws (easy to do) you're going to have a winning campaign in the city.

[enjo13]

Originally Posted by DenverPoke

Ya I read that a few weeks ago, or whenever it was in the DBJ, and found his comment very interesting. I do wonder how other cities are building condo towers if "you can't get the financing" and a large scale project is "impossible".

Not that a ton are being built elsewhere, but there are certainly some.

This isn't really about towers tho. You CAN get financing for the smaller projects, at least in every other city I've visited in the last year. I'm in Dallas today, there are several for sale projects under construction from what I can see.

I get that financing a $400M building is maybe impossible (I haven't seen a ton of those projects outside of San Francisco right now). But that $60M building? That seems completely doable if you're not in Denver.

[Stonemans_rowJ]

It seems like apartment buildings are far more low-hanging fruit than condo projects for developers and for financiers.

For example:

From the DBJ- In the Highlands, 2828 Zuni Apartments sold for $32 million, also brokered by Apartment Realty Advisors. The 105-unit property brought a per-unit price of more than $304,000. The property was sold by a local developer to an institutional investor, Hunt said.

While on the surface it seems like there is more demand for condos from a seat of the pants perspective, when it comes down to it with more strict lending guidelines than during the condo boom years when people were getting 100% LTV, there is far more demand for apartments, because really that is what 99% of millennials and other young urbanites can afford.

So, how much does a building like 2828 zuni cost to build? It's fully leased within 1 year, and then boom, you sell it off to an big investor. Didn't Zocalo do the same thing with Cadence? Seems like that is far less risky than if you were to try to build a condo building on the same lot.

If you look at days on market right now, condos are sitting way longer than detached homes, because condos are competing directly with fully amenitized apartment buildings.

Don't you think big time developers go where the money is? That's what I inferred from the interview with Nichols. Maybe some of these buildings are apartments now but will convert, because financially that's what the system is dictating that they do, and the greatest demand is with apartments. With high enough $/ft like 250 Columbine then sure you can still do for sale units.

Even with a successful passage of that bill, will it open up condo construction to the degree that we have seen with apartment construction? Probably not.

[EngiNerd]

Don't forget this Apartment sale:

The Horizons at Rock Creek apartments in Superior have been sold in the largest multifamily transaction in Colorado history.

In a deal that closed Monday, real estate investor Bell Partners of Greensboro, N.C., will pay about $250 million for the 1,206-unit luxury apartment complex to the southeast of U.S. 36 and South 88th Street.

http://www.denverpost.com/business/ci_27951922/horizons-at-rock-creek-apartments-sell-250-million

[Denver]

For those of you who want to see more renderings of Rossonian click the link below.
https://www.denvergov.org/Portals/646/do...Agenda%20docs/staffreport_lpc_042115.pdf

For those of you interested in seeing a rendering of the proposed building at 2810-2812 Welton, again click the link below.
https://www.denvergov.org/Portals/646/do...810_2812weltonstaffreport_lpc_042115.pdf

For those of you who want to see more renderings of the proposed Hilton Garden at DUS, yet again click the link below. BTW I am starting to like the new design of this building a lot more when looking at it from different angles.
https://www.denvergov.org/Portals/646/documents/landmark/lpc/agendas/Staffreport_LPC_42115.pdf

If someone wants to pull some images from these PDFs feel free. I just don't have the time to do so right now.

[Denver Dweller]

http://www.bizjournals.com/denver/mornin...bqOBYu5F%2FO7W7Amf&t=1429829251&page=all

[CPVLIVE]

Originally Posted by enjo13

Affordable housing is the single most important issue in Denver today. They've managed to turn this lifelong democrat into a Republican, at least for the next state representative election cycle. I think it's possible that Denver could be in play for a socially liberal GOP candidate.

Unfortunately with regards to the condo defect legislation the damage is already done. If we had a fix tomorrow we'd still be looking at 5-6 years (and realistically probably much longer) away from seeing the hoped for desired outcome. No one really knows how much damage is or will be inflicted on Denver, but I think everyone can agree that what has transpired is not good. This is where leadership matters. If Denver had a strong mayor instead of an empty suit - we would have already passed something similar to Lakewood and ended this nonsense. By the way, are any candidates for City Council even aware of transportation as an issue in the City? Doesn't seem so. Ian Harwick, a friend of Ken's is running and wasn't even mentioned by the Post save for listing him among the candidates. As you can probably tell I'm frustrated by what I see as a complete void of leadership in Denver. I actually wrote in Chris Romer for mayor rather than help rubber-stamp four more years of Hancock.

[Denver Dweller]

http://www.bizjournals.com/denver/blog/r...mA+ElKTwGoSbqOBYu5F/O7W7Amf&t=1429830614

[Scottk]

off topic but I would like to know what you guys think of the Bradburn new urbanist village in Westminster?

I was over there the other day and thought it was pretty cool. feels pretty similar to stapleton, in my opinion.

[Denver]

Originally Posted by CPVLIVE

If Denver had a strong mayor instead of an empty suit - we would have already passed something similar to Lakewood and ended this nonsense.

During the committee hearing for SB-177, Mayor Hancock was the first person to testify on behalf of bill. I agree that it would be nice to Denver to pass a law similar to Lakewood's, but from what I understand, it is still undetermined case law if these municipal laws will be able to give developers the protection that they seek.

[LAM]

Originally Posted by Scottk

off topic but I would like to know what you guys think of the Bradburn new urbanist village in Westminster?

I was over there the other day and thought it was pretty cool. feels pretty similar to stapleton, in my opinion.

I like it even though they are missing most of the retail component. But, it is way too expensive -- as usual.

[TakeFive]

Originally Posted by Stonemans_rowJ

It seems like apartment buildings are far more low-hanging fruit than condo projects for developers and for financiers.

While on the surface it seems like there is more demand for condos from a seat of the pants perspective, when it comes down to it with more strict lending guidelines than during the condo boom years when people were getting 100% LTV, there is far more demand for apartments, because really that is what 99% of millennials and other young urbanites can afford.
....

Now that's an excellent comment. I think you hit several nails squarely on the head.

Without the construction defects drag there would probably be some condo construction but the surprising demand and rental rates continues such that it is easier to build apartments. In addition to the projects you mention, Wood Partners who builds a very solid if more basic product has cashed in 3 of their 4 recent projects with Union Station still under construction.

Originally Posted by CPVLIVE

Unfortunately with regards to the condo defect legislation the damage is already done. If we had a fix tomorrow we'd still be looking at If Denver had a strong mayor instead of an empty suit - we would have already passed something similar to Lakewood and ended this nonsense.

Originally Posted by Denver

During the committee hearing for SB-177, Mayor Hancock was the first person to testify on behalf of bill. I agree that it would be nice to Denver to pass a law similar to Lakewood's, but from what I understand, it is still undetermined case law if these municipal laws will be able to give developers the protection that they seek.

CPVLIVE... Whoa, bit of a stretch there. Hancock, unlike the President, can't pass executive orders which likely the defects law wouldn't qualify for anyway. I wondered yesterday if the votes would be their in City Council to pass something in Denver?

Denver... raises a very interesting question which had crossed my mind but I just assumed cities knew what they were doing. Perhaps not so fast?

Stonemans_rowJ... rightly describes the market reality such that I doubt any particular damage has been done. The more affordable condos that will be built (some day) will likely be at TOD's and that market hasn't blossomed yet.

[TakeFive]

Originally Posted by Denver Dweller

http://www.bizjournals.com/denver/mornin...bqOBYu5F%2FO7W7Amf&t=1429829251&page=all

My position would be consistent in that the state shouldn't be meddling in Aurora's business any more than it should be meddling in Denver's business.

[bunt_q]

Originally Posted by Stonemans_rowJ

It seems like apartment buildings are far more low-hanging fruit than condo projects for developers and for financiers.

For example:

From the DBJ- In the Highlands, 2828 Zuni Apartments sold for $32 million, also brokered by Apartment Realty Advisors. The 105-unit property brought a per-unit price of more than $304,000. The property was sold by a local developer to an institutional investor, Hunt said.

While on the surface it seems like there is more demand for condos from a seat of the pants perspective, when it comes down to it with more strict lending guidelines than during the condo boom years when people were getting 100% LTV, there is far more demand for apartments, because really that is what 99% of millennials and other young urbanites can afford.

So, how much does a building like 2828 zuni cost to build? It's fully leased within 1 year, and then boom, you sell it off to an big investor. Didn't Zocalo do the same thing with Cadence? Seems like that is far less risky than if you were to try to build a condo building on the same lot.

If you look at days on market right now, condos are sitting way longer than detached homes, because condos are competing directly with fully amenitized apartment buildings.

Don't you think big time developers go where the money is? That's what I inferred from the interview with Nichols. Maybe some of these buildings are apartments now but will convert, because financially that's what the system is dictating that they do, and the greatest demand is with apartments. With high enough $/ft like 250 Columbine then sure you can still do for sale units.

Even with a successful passage of that bill, will it open up condo construction to the degree that we have seen with apartment construction? Probably not.

No, that actually doesn't make any sense at all. First, it's not a seat of our pants perscpetive. It's the perspective of a very expensive and thorough study commissioned by DRCOG - directed by the legislature and conducted by one of the most reputable firms in town - which clearly found our situation to be abnormal in every way, as compared to peer markets. (The Dems who requested the study ignored it just as soon as it didn't agree with their preconceived notions; we dare not ever criticize climate change deniers when our side is just as bad.) Second, that conflicts with every other developer I know. Third, the market analysis doesn't make sense. It takes a certain threshold to get an apartment project off the ground - there's a reason most projects hover right around 300 units. But there is no market based reason why a developer - perhaps a smaller developer - wouldn't tackle a smaller condo project, which is actually exactly what our zoning, and probably market demand, would call for. Yet you don't see any of those projects here, whereas they are common in every other peer city.

So no, basically, this isn't a matter of opinion. The facts just don't support that conclusion at all.

[TakeFive]

Originally Posted by bunt_q

No, that actually doesn't make any sense at all. First, it's not a seat of our pants perscpetive. It's the perspective of a very expensive and thorough study commissioned by DRCOG - directed by the legislature and conducted by one of the most reputable firms in town - which clearly found our situation to be abnormal in every way, as compared to peer markets. (The Dems who requested the study ignored it just as soon as it didn't agree with their preconceived notions; we dare not ever criticize climate change deniers when our side is just as bad.) Second, that conflicts with every other developer I know. Third, the market analysis doesn't make sense. It takes a certain threshold to get an apartment project off the ground - there's a reason most projects hover right around 300 units. But there is no market based reason why a developer - perhaps a smaller developer - wouldn't tackle a smaller condo project, which is actually exactly what our zoning, and probably market demand, would call for. Yet you don't see any of those projects here, whereas they are common in every other peer city.

So no, basically, this isn't a matter of opinion. The facts just don't support that conclusion at all.

Not a study that I was even aware of but it doesn't change my agreement with Stonemans_rowJ. But I suspect you are both right.

I'll assume that the DRCOG study was for Metro Denver while I assume Stonemans_rowJ was focusing on the downtown area. But I'd guess you're right about the smaller developer building condos even in the near downtown area.

I can think of a couple of likely downtown condo projects that sit on the shelf waiting for the construction defects law to change but in the big scheme of things Stonemans_rowJ is right that apartments are much easier to finance with less risk (not counting the defects situation) and liquidate at good returns if desired.

I do not doubt the negative affect of the existing defects law with developers though. I'm sure there would be more interest in condo construction if not for the current mess. I think Stonemans_rowJ was more asking the question and I think his points are well taken.
I say you are both right.

bunt_q... Would you have an opinion on the good question raised by Denver about whether developers can rely on city passed defects laws to supersede the state laws?

[Stonemans_rowJ]

Originally Posted by bunt_q

No, that actually doesn't make any sense at all. First, it's not a seat of our pants perscpetive. It's the perspective of a very expensive and thorough study commissioned by DRCOG - directed by the legislature and conducted by one of the most reputable firms in town - which clearly found our situation to be abnormal in every way, as compared to peer markets. (The Dems who requested the study ignored it just as soon as it didn't agree with their preconceived notions; we dare not ever criticize climate change deniers when our side is just as bad.) Second, that conflicts with every other developer I know. Third, the market analysis doesn't make sense. It takes a certain threshold to get an apartment project off the ground - there's a reason most projects hover right around 300 units. But there is no market based reason why a developer - perhaps a smaller developer - wouldn't tackle a smaller condo project, which is actually exactly what our zoning, and probably market demand, would call for. Yet you don't see any of those projects here, whereas they are common in every other peer city.

So no, basically, this isn't a matter of opinion. The facts just don't support that conclusion at all.

I actually do not know what the DRCOG is but I'd be interested in seeing this very expensive study.

So the study says there is huge demand from ready, willing, and able condo buyers? I am all for reform and hope all these proposed condos get off the ground. I just think as I stated that is a niche, and apartments are the mainstream, what most millennials and younger urbanites will be demanding and consuming.

You're right about smaller projects. That's why we're seeing 12,14,16,18,24 unit townhome rows everywhere. Similar product, different name, different packaging.

[wong21fr]

Originally Posted by Stonemans_rowJ

I actually do not know what the DRCOG is but I'd be interested in seeing this very expensive study.

So the study says there is huge demand from ready, willing, and able condo buyers? I am all for reform and hope all these proposed condos get off the ground. I just think as I stated that is a niche, and apartments are the mainstream, what most millennials and younger urbanites will be demanding and consuming.

You're right about smaller projects. That's why we're seeing 12,14,16,18,24 unit townhome rows everywhere. Similar product, different name, different packaging.

What is evident is that as a percentage of new-build construction, the Denver Metro Area has the lowest amount of condominiums being built nationwide by a wide margin. I think that the average nationwide is somewhere around 7% of for-sale housing being built is a condominium format, Denver has something like 2%. The tastes of Millenials and their inability to qualify for a loan doesn't account for that much of a spread between the two numbers as both of these elements are a nationwide trend. Instead, there have to be other variables causing a correlation- such as construction deficit issues.

I don't think thinks that condos are going to magically make a huge dent in the number of apartments that are being demanded- Millenials are a) too broke, b) unable to qualify for financing, c) probably hesitant over the commitment that home ownership implies. But, there is certainly a demand beyond what is currently available and it would be nice for a small subset of Millenials to start building equity value in the city instead of having to decamp towards the suburbs to build their net worth.

[TakeFive]

Originally Posted by Stonemans_rowJ

I actually do not know what the DRCOG is but I'd be interested in seeing this very expensive study.

Denver Regional Council of Governments
I tried a quick search but the site server quit, lol.

With a google search I found THIS pdf which is from October of 2013. Looks like that's the study.

[TakeFive]

Originally Posted by wong21fr

What is evident is that as a percentage of new-build construction, the Denver Metro Area has the lowest amount of condominiums being built nationwide by a wide margin... Instead, there have to be other variables causing a correlation- such as construction deficit issues.

I don't think thinks that condos are going to magically make a huge dent in the number of apartments that are being demanded- Millenials are a) too broke, b) unable to qualify for financing, c) probably hesitant over the commitment that home ownership implies. But, there is certainly a demand beyond what is currently available and it would be nice for a small subset of Millenials to start building equity value in the city instead of having to decamp towards the suburbs to build their net worth.

Well said... agree.

Thinking more of downtown there's the proposed project in Union Station plus I'd guess 999 17th Street would build condos if not for the current risk from being sued. Not sure there would be much in the way of affordable units though.

I also believe there would be condos being built in the suburbs which is equally important for millennials or whoever.

[TakeFive]

story and photo per http://www.thedenverchannel.com/

Decade or so ago I would pack a picnic sometimes from Jason's Deli, maybe a little wine and stop by Commons Park on the way to a Rockies game.
No nefarious activity there back then.