Plaza on Broadway

955 Broadway Street, Boulder, CO 80302

Total Offering Price $27,250,000

Anticipated Investor Equity $8,350,000

  • 1st Year Targeted Cash-on-Cash Return 7%
  • Anticipated Loan Amount $18,900,000
  • Anticipated Loan-to-Value 69.36%
  • Minimum Investment $50,000

The property is ground-leased from a fraternity who turned over the use of the property for development of Plaza on Broadway. The ground lease is 70 years with more than 68 years remaining. With any largescale campus like CU that has been around since 1850, land this close to campus is inherently scarce.

955 Broadway Street, Boulder, CO

Nelson Brothers believes the ground lease helps provide a sustainable competitive advantage by enabling all-new construction at such a unique location across the street from a major university.

MARKETING HIGHLIGHTS

  • In Q3, 2014, average occupancy for the university area in Boulder was near 98%
  • Average rental rates for the university area in Boulder increased from approximately 11% from Q4 2013 to Q3 2014
  • Apartment Association of Metro Denver projects 2015 occupancy to remain near 95%
  • CU Enrollment increased to 341,700 in 2014 from
    28,839 in 2013

property Profile

  • Year built 2013
  • Number of units 39
  • Number of beds 152
  • Net rentable SF 50,786
  • County Boulder
  • Property Interest Leasehold – Subject to Ground Lease
  • Ground Lease Terms 60-Year Term (58 years remaining)
  • Lot Size 1.44 AC
  • Parking Underground Parking Available

Target Strategy

The primary investment strategy is to leverage what Nelson Brothers sees as a sound location to maintain consistently high occupancy, monthly cash flow, income tax efficiency through depreciation and appreciation potential. Nelson Brothers’ goal is to raise rents in the 5% to 7% range annually while securing the leases by requiring 12-month lease terms and parental guarantees. Given Plaza’s close proximity to campus, Nelson Brothers expects the property to attract students without the need for highend amenities and features. Without a pool and other large fixed expenses, Nelson Brothers hopes to mitigate ongoing expense growth. If the property can succeed in growing rental rates, a lower expense ratio can help optimize the impact on the bottom line.

NB The Plaza DST

University of Colorado

NB The Plaza DST

CU has maintained a strong draw from rural Colorado and Denver suburb students. But the university also boasts several compelling selling points that resonate with affluent students from both coasts; the academic reputation, proximity to the mountains and easy access from Denver all have helped contribute to continued enrollment growth. According to university sources, year-over-year applications for enrollment were up over 33% in 2013 and another 12% in 2014. Another key change fueling this growth is the athletic conference upgrade to the Pac-12, a move that has significantly increased athletic revenues and has helped draw more interest from affluent west coast students.

Barriers to Entry

The city council of Boulder currently has a moratorium placed
on new development on “The Hill” submarket. Nelson Brothers
anticipates that this moratorium may continue as it seems borne
out of a desire to limit the student influence in this region as an
attempt to keep the economy more balanced and less dependent
on the university. With the potential for growing demand through
increasing enrollment and limited new supply in the submarket,
this could result in highly favorable economics for the Plaza.

Anticipated Loan

 TermsNon-recourse. 10-year fixed interest rate loan, 30-year amortization, 4-year interestonly loan from Ladder Capital. DST structure.

 

Ground Lease

The property is ground-leased from a fraternity who turned over the use of the property for development of Plaza on Broadway. The ground lease is 70 years with more than 68 years remaining. With any largescale campus like CU that has been around since 1850, land this close to campus is inherently scarce. Nelson Brothers believes the ground lease helps provide a sustainable competitive advantage by enabling all-new construction at such a unique location across the street from a major university. Nelson Brothers does not foresee issues associated with the ground lease as even with a 5- 7- or 10-year hold, there would still be 58 to 63 years left on the lease for the next buyer. Further, because there is no ownership in land, this allows virtually the entire investment to be depreciable and help optimize tax efficiency through depreciation.

ABOUT Nelson Brothers

16B Journey | Aliso Viejo, CA 92656 (800) 580-1031

Current Management Portfolio At-A-Glance:

Founded in 2007, Nelson Brothers specializes in what the firm considers to be well-positioned student housing properties. Headquartered in Orange County, CA, Nelson Brothers manages over $500 million in real estate with more than 100 employees.