Approximately 73% of the cost of the Alexan Prospect is being funded with a $70.5-million construction loan from KeyBank National Association. For its share of the project's equity requirement, the REIT and its partner, Dutch pension fund Stichting Pensioenfonds Zorg en Welzijn paid Trammell Crow $7.36 million (7.8% of the overall cost) in cash and provided a $14.8-million mezzanine loan (15.6% of overall cost) for the project which bears interest at 10%. Upon completion of the Alexan Prospect Project, The Behringer-PGGM partnership has the option to convert the mezzanine note to a capital contribution, according to SEC filings.
The 367.433-sf (net rentable) development will rise at the intersection of Inca and 20th streets, between Coors Field and the river. The site is near both Interstate 25 and historic Union Station, which is being redeveloped to serve as a multimodal, regional transit hub where light rail, commuter rail and buses will converge. The overall Central Platte Valley redevelopment will include millions of sf of residential, office, retail, restaurants and hotels.
TCR typically directs its developments in partnership with various equity partners. TCR acquires the property using equity from the partner while taking anywhere from a 0% to 10% equity interest in the project. It then handles the entire process, from governmental approvals through construction and lease-up. For its effort, in addition to development and management fees, it typically gets a substantial percentage of the back-end profit from the sale of the stabilized asset.
In explaining its Alexan Prospect investment, Behringer Harvard SVP Mark Alfieri says that in a study published by Urban Land Institute and PricewaterhouseCoopers Denver was the only non-coastal city ranked in the top tier of cities to watch during 2008, due in large part to its Downtown renewal activities. "The Denver metro's economy also has remained stable in spite of the challenges we're experiencing on a national level," he says. "We believe this development will allow us to create value for our investors by expanding our multifamily portfolio into Denver's reinvigorated core to provide upscale housing that will be attractive to those who appreciate a sophisticated urban lifestyle."
The investment is not a one-off relationship between Behringer Harvard and PGGM. The Dutch pension fund, which manages $95 billion on behalf of 1.9 million families of healthcare and social workers, committed to invest up to $200 million to these 55%-45% co-investment ventures with the REIT and may increase its commitment to $300 million at any time prior to November 9, 2011. The REIT's corresponding commitment is $247 million, rising to $370 million if PPGM raises its commitment to $300 million.
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