The makeover of a long-empty (and lender-owned) seniors housing high-rise into high-end rental apartments is fraught with challenges. Fortunately for The Koman Group and its operating partners, the conversion of Clayton On The Park, which developer Koman recently acquired from former mortgage holder Sovereign Bank, might more appropriately be characterized as a “reversion.” The strategically located, 24-story tower in downtown Clayton, Mo., a suburb of St. Louis, actually began life as a luxury rental a dozen-some years ago.
The well-appointed tower has been vacant for nearly two years, in the wake of an ill-timed conversion to seniors housing by locally based Conrad Properties and retirement-home giant Sunrise Senior Living.
Terms of the deal between Koman and Sovereign weren't disclosed, but media reports had the tower trading at $34.3 million, which translates to just under $165,000 for each of the 208 apartments the new team will lease up and operate after completing modest improvements.
One key to leasing the units will be the strong team Koman has assembled to help manage the transition and operate the historically commercial-leaning firm's inaugural high-rise multifamily rental property. San Diego–based Wermers Cos. is acting as co-developer, while Dallas-based Riverstone Residential Group will be the property manager.
It also helps that demand for rentals is quite robust in the St. Louis vicinity and that the supply of newer high-rise rentals in the dynamic Clayton submarket is limited. “There's not much available in high-end rentals [here], generally, and nothing's coming out of the ground in the near term,” says Jason Braidwood, the Koman managing director overseeing the investment.
While it would presumably take a couple to three years for developers to deliver any competing product, Clayton On The Park will be ready for new residents after just a few “finishing touches,” as Braidwood puts it, including new flooring, counters, fixtures, and appliances. The team anticipates healthy interest from young professionals and empty-nesters for the tower's mostly one- and two-bedroom units, with downtown Clayton having become quite an entertainment hub for the St. Louis metro area. And there's nothing else quite like the property anywhere nearby, as Braidwood is quick to point out. He should know: Koman also developed the only new Class A office high-rise downtown Clayton has seen in the past decade.
Wells Fargo offered an appealing senior loan structure to take down, remodel, and stabilize the asset, Braidwood notes while declining to disclose further details, including asking rental rates, which hadn't been set as of press time. The deal is sitting well with the Koman team, which is already looking forward to getting its feet wet in anticipation of additional residential rental investments.
Brad Berton is a freelance writer based in Portland, Ore.