Rental income plummets at bankrupt downtown apartment building

Denver apartment building sees rental revenue drop

The Auraria Student Lofts share a building with the Curtis Hotel at 1051 14th St. in the Central Business District. (Google Maps screenshot)

Auraria Student Lofts in the Central Business District, which is being run by a court-appointed caretaker following years of alleged neglect and mismanagement by the national company Nelson Partners, has seen a decline in rent revenue this year, financial records show.

The 14-story apartment complex, which sits atop the Curtis Hotel at 1051 14th St., is marketed as upscale college living two blocks from the Auraria Higher Education Center. It filed for Chapter 11 bankruptcy last month. A receiver, Cordes & Company, has operated it since Jan. 31.

Bankruptcy filings show that receiver collected $1.1 million in rent over five months between the start of February and the end of June. By comparison, the lofts generated $4 million during the pandemic year of 2020 and nearly $3 million in the pandemic year of 2021. Its occupancy rate has hovered around 63 percent this year, far below the market average, records show.

As the building’s owner and its receiver argue over which of them is to blame, current and former residents are caught in the middle. Court records show that about 100 are owed security deposits worth $57,000 that haven’t been refunded, forcing some to file lawsuits. The receiver says the owner should pay. The owner says the receiver and a lender, Fortress Capital, should pay.

“The decision of Fortress and the receiver to stiff the student tenants, in Fortress’ own words, ‘damaged the reputation of the property, making it harder to attract tenants,’” an attorney for the owner, Nelson Partners, wrote last month.

Meanwhile, an elevator was broken for much of the year, facade repairs are ongoing, and many vendors refuse to work there because of its reputation for non-payment.

“There has been a general lack of preventive maintenance at the property as evidenced by the poor state of the elevators, the clogged pipes, old and soiled mattresses (and) frozen pipes at the pool,” an attorney for Cordes & Company wrote in an April court document.

Auraria was acquired in the fall of 2019 by Nelson Partners, a California company that once owned about two dozen student housing complexes in 10 states but has since lost several to sales or foreclosures. Nelson has angered investors and tenants, who accuse it of neglect.

Auraria is now in the possession of Fortress, a powerful investment firm in New York City, which loaned Nelson Partners about $47 million and hasn’t been repaid. An attorney for Nelson Partners claims Fortress is predatory and self-serving.

“Fortress comes in bad faith — as a predator — and the relief it requests is inimical to the interest of creditors and equity as a whole,” attorney Michael Pankow with Brownstein Hyatt Farber Schreck wrote to a federal bankruptcy judge in late June.

Pankow says the property doesn’t belong in the hands of a receiver. Instead, Nelson Partners should be allowed to take it back, renovate it and sell it for upwards of $80 million. This, he claims, would allow Nelson to pay its debts. The alternative, a foreclosure, will give Fortress “a multi-million dollar windfall at the expense of other parties,” Pankow wrote June 27.

The property came within 57 minutes of being sold at a foreclosure sale last month, but Nelson’s bankruptcy filing caused a postponement, and the sale has remained postponed since. City records indicate that Fortress would have won the sale with a $51 million bid.

Pankow has accused Cordes & Company of making “sundry, puffed-up criticisms of property conditions and day-to-day operations” that fail to prove the lofts should stay in the hands of a receiver. He said low rent revenue can be blamed on the receiver pausing renovations, doing a poor job pre-leasing, “disrupting marketing activities and creating uncertainty.”

A hearing in the matter is scheduled for Aug. 8 in downtown Denver.

 

Denver apartment building sees rental revenue drop

Denver apartment building sees rental revenue drop

The Auraria Student Lofts share a building with the Curtis Hotel at 1051 14th St. in the Central Business District. (Google Maps screenshot)

Students are owed $57,000 in security deposits, pipes are clogged, mattresses are soiled, and elevator problems remain, court records show.

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