Superior apartments to become condos

SUPERIOR – Colorado & Santa Fe Land Co. founder and Chief Executive Officer Marcel Arsenault has teamed up with a partner, Everett Wiehe, and investor Jeff Wells to purchase the Jefferson at Rock Creek apartment complex off U.S. 36.for $35 million – or about $95 per square foot.

Arsenault said the three have been tracking apartment complex sales, and the deal was the largest of its kind in Colorado this year in terms of single complexes.

“There just aren’t that many $35 million deals done,” he said.

The seller was JPI Partners, a Dallas-based owner of high-end apartment complexes nationwide that has a regional office in Denver.

Almost 150 of the 324 units are expected to be converted immediately to condominiums and are expected to sell within a year. It’s anticipated that the rest will be sold as condos in phases.

The project is in a “superb location,” Arsenault said, across U.S. 36 from Storage Technology Corp., within walking distance west of the 1.5 million-square-foot regional shopping mall FlatIron Crossing that’s under construction and west of Interlocken business park, where Sun Microsystems and Level 3 Communications have campuses. Buyers and renters alike will be able to walk to FlatIron Crossing when the mall opens “and yet you’re not completely in its face,” he said.

“Boulder is a very tight market,” he noted for home buyers. “There’s such a powerful demand that can’t be met.”

The gated community contains 24 two-story buildings. It is a luxury townhome-style project, but Arsenault said he expects the condominiums to provide a new niche in the market as part of the answer to the county’s affordable housing dilemma.

Omaha, Neb.-based Commercial Federal provided $29 million in financing for the acquisition. It was the largest loan the bank has ever done, according to Bob Richards, a bank vice president and manager of the Colorado Income Property Division.

Arsenault said he and Wiehe have been working on lining up the financing since July. They had many choices because to a “sophisticated” bank or investor the deal was “extremely viable” due to the track record of the complex, he said.

The project, built in 1997, is more than 95 percent leased as an apartment complex. It includes 81 one-bedroom (about 806 square feet), 214 two-bedroom (about 1,284 square feet) and 29 three-bedroom (about 1,463 square feet) units. The total square footage of the project is 367,189.

Wells of Frederick Ross will purchase 145 of the units to convert into condominiums. Prices are expected to start just above $107,000, according to Arsenault. Fowler Real Estate/Better Homes and Gardens of Boulder will market the project for Wells under the name Saddle Brook Condominiums.

“It’s a great opportunity, I think, for the person who wants to buy a house in Boulder County before the prices shoot out of sight – completely out of sight, completely out of reach,” Arsenault said.

Referring to the Superior project, Byron Koste, director of the Real Estate Center at the University of Colorado at Boulder, said $150 per square foot for home buyers to pay for residential “in the city of Boulder is a good price, especially for a reasonably new product that’s well located, which I believe that product is.”

If the seller can produce a residential product that garners close to $150 per square foot, then the condominiums will be a good deal, Koste said. If they end up selling closer to $200 per square foot, “then that’s just the norm and it will be not that unique other than its location,” he said.

Koste added that if the prices aren’t close to $150 per square foot, then the condos will be “just another Boulder product that’s outside the city limits.”

He said $35 million for 324 units is a fair price. “It certainly is a large project,” he said.

The issues, Koste said, are conversion costs – depending on how the project was built it may be easy to convert to condos or difficult – and what changes are necessary to sell the project as condominiums.

Arsenault said the project originally was designed using condominium and townhome plans and will lend itself well to a conversion. Arsenault has been behind such conversions in Boulder, Winter Park, Fort Collins, Denver and Salt Lake City. He said he always has invested in existing projects, calling many other development deals risky because so many communities are worried about growth. He owns or has ownership in about 75 projects.

“The reason why I like it is because it’s an extremely safe form of development,” Arsenault said. “This is a very safe project, in my opinion. And it meets the needs of people who want to own their own house as opposed to renting.”

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