Argosy Exits Block 32 at RiNo
Argosy Real Estate has exited its investment in Block 32 at RiNo, a multifamily development project in the River North neighborhood of downtown Denver, CO. On February 6, 2014, the Property sold to a Colorado-based high net worth investor. The Property includes 205-units averaging 916 square feet, a 3,500 square foot club house and amenity area, pool, elevator service, surface parking, and garages. The Property is located less than one mile from Denver’s central business district.
In October 2011, Argosy made a controlling equity investment in a partnership to acquire the 4.3 acre site. The partnership was formed with Prospect LLC. Prospect, based in Denver, has deep experience in multifamily development and operations in the Denver market. The 4.3 acre site, which is relatively large for an infill location, allowed for four-story wood frame construction and on-grade parking. This offered significant cost savings over the higher-density construction methods required for comparable urban locations, which allowed the project to be delivered at an attractive relative cost basis. Construction risks were mitigated through the use of a guaranteed maximum price construction contract. Stabilized occupancy was achieved in December 2013, with 96% of units leased.
The partnership was able to create significant value by successfully completing construction and leasing up the property in a market which has experienced strong rent growth since acquisition. Also since October 2011, multifamily assets in Denver have experienced cap rate compression. Increasing rents and declining cap rates plus attractive long-term fixed-rate assumable debt resulted in an asset value upon stabilization that was well above original underwriting. As a result, the partnership elected to begin the sale process shortly after construction was completed. The consummated sale generated greater net profits than pro forma expectations, over a significantly reduced hold period. Argosy is pleased to have achieved this outcome and believes the results are a direct result of our key investment principles: seeking a competitive cost basis; identifying clear paths to creating value at the asset level; protecting principal in downside scenarios; identifying multiple exit strategies; and partnering with experienced, best-in-class operating partners.