Denver-based Sagebrush Companies has a much-in-demand specialty: Not only does it develop real estate for residential construction, it also sells that land as a kind of turnkey project, with vertical design and construction as part of the overall package. Sagebrush will manage the property, too, if the building’s owner so desires that service.
“It’s not that common to come across deals like this, which include the entitlements, the planning, the CDs [construction documents] and so forth,” says Brian Wynne, vice president of development for Simpson Housing, a Denver-based real estate firm with a portfolio of more than 20,000 apartment units across the country.
On June 14, Simpson Housing paid Sagebrush a reported $5.4 million for a “shovel-ready” infill multifamily development property in Denver’s Lower Highlands. That 23,847-square-foot property, known locally as LoHi City View Apartments, is a planned 114-unit, five-story luxury apartment development with 138 structured underground parking spaces and 110 storage units. The price that Simpson paid—the equivalent of $226 per square foot—is said to be a record for this market.
From Soft Costs to Breaking Ground
Simpson was attracted to this deal, says Wynne, by—what else?—its location.“This is an A-plus, top multifamily submarket.” But Simpson also liked the fact that the site was permit-ready.
Sagebrush spent a considerable amount of time and money taking care of the "soft costs.” Wynne estimates that had this site only been zoned, it would have taken Simpson another year, at least, to get the entitlements and permits in place. There also were no discretionary approvals from government agencies to worry about. “Sagebrush took care of that, too,” says Wynne.
The price that Simpson paid includes development, design, and construction, says Donald Caster, a principal and executive vice president at Sagebrush, which bought this site in March 2012 for a reported $1.8 million. To get this site ready for development, Sagebrush had to raze three houses and one office building. The company broke ground on this project last month.
Sagebrush hired DAE, a local builder, to construct this building, which will cost an estimated $15 million to complete. On its website, DAE says the start date will be some time in the third quarter of this year. Wynne expects the building to be ready for occupancy by the fourth quarter of 2014.
Sagebrush confines its activities to for-sale and for-rent infill development and construction in Denver, and those projects, says Caster, “are very difficult to find right now.” That being said, Sagebrush has shown Simpson Housing a few local projects it might be interested in. “I’d love to do another deal with them.” But any future deal would have to be in a core submarket, close to employment and freeway access, he says.
John Caulfield is senior editor for MFE’s sister publication Builder.