John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... 
200 condos have sold at the Spire so far. But without the Southern Ute Tribe the high-rise would never have gotten off the ground.
It’s been a well-publicized roller coaster ride for the Spire, the 42-story, 496-unit condominium high-rise in downtown Denver.
It is common knowledge that the first lender on the project, Hypo Real Estate of Germany, pulled the plug in 2008, making the Spire one of the first Denver victims of the global financial meltdown. That was followed by the plight of its successor lender, Corus Bank of Chicago, which was shut down and taken over by the Feds.
But what has not been publicly discussed, until this article, is that an arm of the Southern Ute Indian Tribe in Colorado came to the building’s rescue. And it appears to be a wise move by the Durango-based GF Properties Group LLC, a wholly-owned subsidiary of the Southern Ute Indian Tribe, as Nichols said today that 200 units have sold so far.
200 units sold
“Selling 200 units is quite the milestone,” said Nichols, principal of Nichols Partnership, the developer of the tower. “Selling 200 units is reaching quite a threshold. A big one. It will be another big threshold when we hit 300.”
But none of this would have happened if GF Properties had not invested in it.
“Basically, they bailed out the project,” Nichols said on Friday. “When we lost our loan the first time around, the only way we could get a second loan was to bring the leverage down, which means we had to bring in more equity. GF Properties stepped up to the plate. I can honestly tell you we would not be here today if not for them. No question about it. They pulled us out of the ashes.”
The only reason that Nichols is now talking about the important role they served is because Pat Vaughn, president of GF Properties, agreed to speak with InsideRealEstateNews.
“The told us early on that they wanted to be very low-profile, and they didn’t want us identifying them as a big investor in the building,” Nichols said.
Vaughn said he always liked the Spire, even before ground was broken.
GF interested before ground broken
“We had talked to Randy at the Nichols Partnership about investing early on, when they were still in the planning stages,” Vaughn said. “We were going to make a small investment on the construction side, but we never did. Then when Hypo pulled out, and Randy was searching for various financial alternative sources, we ended up coming in. So in a way, it was that early misfortune that brought us in.”
As far as Corus, Vaughn said they “were pretty aware” the bank was in trouble, “and we were watching it pretty closely.” He said GF was able to “reach a resolution” with the FDIC, and ultimately the Starwood Capital Group, which took over 112 construction loans from Corus, including the one for Spire. Most of them were for Florida condo projects.
Vaughn declined to say how much GF Properties invested in Spire.
“It is substantial,” Vaughn said. “Let’s just say we put in a substantial amount.”
Design, location, price points attractive
Vaughn said that a number of things about the Spire, at 14th and Champa streets, appealed to him.
“We really like the design of the building; the design is very good,” he said about the building, whose architect is RNL Design.”The second thing, we really like the location. The location is second to none. It is a great location. And third, and probably most importantly, is the price point. We had no interest in investing in a very high-priced condo project. We liked the idea of a more affordable project.”
He also likes that the Spire is packed with energy saving features. The building was certified as LEED (Leadership in Energy and Environmental Design) by the U.S. Green Building Council in June. LEED features include a contract to receive 100 percent of its electricity from renewable sources a 61.4 percent reduction in potable water consumption; improved indoor air quality through enhanced air-filtration, and low-emitting materials for paint, coating and carpets.
Green thread runs through investments
“Sustainability is very important to us,” Vaughn said. “Even here in Durango, our office in the first LEED-certified building in this part of the state. Sustainability is not only the right thing to do, but given the long-term nature of our investments, it makes sense for us.”
He noted that Belmar, “which has really become the downtown for Lakewood,” has one of the largest privately owned solar photovoltaic systems in the area, as well as a commitment to energy savings wherever possible.
And the 755-acre Candelas at Highway 93 and Highway 72, which eventually will have 1,500 units, has been described as the largest green community of its type in the nation. “We are very close to submitting our final plans to the city of Arvada on Candelas,” Vaughn said. “We will be talking to builders. When we move forward will depend on market conditions. We’ll start it when the time is right.”
GF also owns 78 lots in the Ridgegate subdivision in Douglas County, which it is in the process of selling.
Apartments not in the cards for Spire
Vaughn said that they never seriously considered turning the Spire into rental apartment units, as some people in the real estate industry were speculating a year ago.
“I don’t think the Denver economy is great for high-rise apartments, for the most part,” Vaughn said. “When you look at the construction costs vs the kind of rents we would need to generate to support those costs, it just wouldn’t have made sense. The building was designed to be condos, and I think that decision was the right one and has been borne out by its success. We are very pleased with how it is performing.”
Nichols said of the 200 sales, they have been priced from about $200,000 to about $800,000.
“Clearly, the vast majority of the sales have been in the $200,000 to $400,000 range,” Nichols said. “That is consistent with what is happening in the overall market. It is the more affordable and lower-priced points that are selling. That is the only thing that is working. Buildings that are selling units for $1 million and more, are going to have much more of a struggle.”
Young professionals buyers
Originally, Nichols targeted the younger professionals downtown, who could not afford buying a nice place downtown in the past.
“Almost exactly what we thought was going to happen, has been happening,” Nichols said. “Most of our buyers are coming from the 25 to 40-year-old crowd. They are either singles or doubles, with no kids. Lately, though, we’ve had a real push to bring in more empty nesters who want the downtown lifestyle, and we seem to be having a pretty good success with those efforts.”
Nichols bought one unit as an investment, although he has not yet tried to rent it.
“We were talking about moving our family into it,” Nichols said. “Unfortunately, we put our (Country Club) home on the market, and at the same time, four other homes about 100 feet away went on the market. So we have a tough-time selling a higher-priced home. I’m seeing the market from both sides. I’m the victim of the market on one side, but a beneficiary on the other side.”
Vaughn noted that while GF “has people on the ground,” at the Spire, its day to day management is handled by the Nichols Partnership.
“They are certainly involved in any conversations or negotiations of substance,” Nichols said. “If we are considering making an important decision, we tell them about it first. They have been in conversations and negotiations with Starwood, for example.”
Some observers have speculated that having GF in their corner gives them more clout when dealing with groups such as Starwood, which may consider the Spire a “one-off” project in this case, since the majority of their properties are in Florida.
“I would not say it is any different than having any other equity partner,” Nichols said. “I don’t believe because they are the Southern Ute Indian Tribe that makes any difference. They don’t try to play the Indian card or the “poor me” game. You have to really admire them for that . They are always very professional.”
GF’s portfolio in the Denver area also includes an office building in Aurora leased to defense contractor Northrop Grumman. Outside of Colorado, it also owns everything from apartments to office buildings from Kanas to California.
Would it be interested in buying other properties in the Denver area?
“We are always looking,” Vaughn said. “We do a great deal of due diligence before buying or investing in anything.”
For information about units for sale at the Spire, go to this link at COhomfinder.com.
Contact John Rebchook at JRCHOOK@gmail.com.
