Vanessa Abrahamson Blog: UDR surpasses Hollywood mogul in record-breaking deal

Thomas W. Toomey, the longtime CEO of UDR, one of the nation’s largest residential REITs, admitted earlier this year, “We missed it” regarding the staking of a large claim in the company’s Denver backyard.

Toomey, CEO of Highlands Ranch-based UDR, which has a market cap of about $10.5 billion, said he’s been telling his board members for the past six years that Denver is being overbuilt and a correction is coming.

“Eventually I’ll be right,” he quipped last January while sitting on a podium at a conference sponsored by ULI Colorado.

A nighttime view from Steele Creek’s infinity pool deck, which UDR bought for $141.5 million

Well, Toomey, who has not only been the CEO of UDR since 2001, but also the current one global chairman for ULI, didn’t miss an opportunity to close the biggest apartment deal ever in Denver according to a series of metrics. (Toomey declined to comment on this article because, as a public company, UDR “does not comment on potential transaction activity on a quarterly basis unless a press release has been publicly distributed.”

He even outbid a Hollywood mogul on his record-breaking deal for the Steele Creek condominium in Cherry Creek.

UDR paid $141.5 million for the 12-story, 218-unit Steele Creek at 3222 East First Ave.

That equates to a record price of $649,083 per unit. Even if $17 million is subtracted from the total to account for value Matsuhisa Gastronomy and other retail shops on the ground floor, that was a record price by far Terrance Huntpart of ARA Newmark Team that listed and sold the trophy tower on behalf of Matt Jablons BMC investments.

“I believe this is the largest single deal this year so far,” said Hunt. “I think there have been a few in the $120 million range, but I can’t think of any others that are over $140 million.

It’s not just the price that makes buying UDR stand out.

“There was a lot of talk about the record price per unit, but it was also a record price per square foot,” added Hunt, who listed the property along with fellow ARA brokers Jeff Hawks, Doug Andrews and Shane Ozment.

It sold for $680.50 per sf including retail.

“Excluding retail, it sold for over $600, and that’s $100 more per square foot than the next biggest deal,” the Joule’s $120 million sale last year, which is now the 1000 Speer by Windsor is called.

And compared to nearby properties, UDR arguably didn’t overpay.

“That Paul’s Corp. sells condos just down the street in laurel for $1,000 each sfand Steele Creek has condo-quality units with a downstairs sushi restaurant operated by a world-renowned chef,” said Hunt.

In fact, one of the three offers for Steele Creek came from a “billionaire Hollywood producer” who was a personal friend of “Cook Nobu” by Matsuhisawho opened his only restaurant in Denver in Steele Creek.

A view of the Denver skyline from Steele Creek

Unsurprisingly, Hunt can’t confirm the Hollywood mogul’s identity.

“I can confirm it wasn’t Harvey Weinstein,” Hunt said when asked about the film executive who was fired from his eponymous company after the New York Times reported that he had accused at least eight women of inappropriate and unwanted dealings Cash payments had sexual advances.

The fact is that gastronomy and retail often reduce the selling price of a flat share.

“A lot of apartment types are non-retail types and view retail space as something they’re likely to need to replace and spend a lot of money on tenant improvements,” Hunt said.

“So if you have an apartment building in a not-so-desirable location and the city demands it with retail stores, there’s probably a good chance a coffee shop won’t make it,” he explained.

But Cherry Creek is Denver’s Rodeo Drive.

“They have the only Koch Nobu concept in Denver, in Denver’s strongest retail market. And Steele Creek residents have their own separate entrance into Matsuhisa, so it’s a great convenience for them.”

Also, some Steele Creek penthouses command rents of $5.27 per sf or $7,000 per month. “And I think they immediately combined two penthouse units,” with a monthly rent of about $15,000, according to Hunt.

“They had professional athletes and CEOs living in Steele Creek,” he said, which is more than 90 percent documented.

Hunt believes the sale will represent the high water mark for some time.

“It’s a tall building with amazing views of the skyline and mountains in Cherry Creek, which has a lot of barriers to entry, and it fetches the highest rents in Denver,” Hunt said.

Terrance Hunt

“I just don’t see an opportunity for a sale that dwarfs the price per unit and per sf in the near future,” he said.

UDR granted the property a $90 million construction loan.

“UDR was intimately familiar with every aspect of the building,” said Hunt.

Hunt and the ARA team gave about 24 tours of the tower, but not for Toomey and others from the UDR.

“They knew it from the days when you needed a hard hat to get to the job site,” Hunt said.

Everyone who viewed the property wanted to buy it, but they couldn’t get the financing going because institutional investors were more interested in buying Denver Class A suburban properties than urban properties, he explained.

“You can argue that we need more units, but the problem was that this huge supply of the same type of luxury product started operating at the same time in the same place,” he said in neighborhoods in and around downtown.

Matsuhisa anchors retail on the ground floor of Steele Creek.

But then came the absorption numbers for the first, second and third quarters, which showed properties were being rented out and rental concessions weren’t as drastic as many had feared.

“UDR really was the perfect buyer,” said Hunt. “I felt like in the back of Tom’s (Toomey) mind he didn’t want to let this one go. UDR will be a long term owner and I think they will be very happy with their purchase.”

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