M2 Apartments, Littleton, CO

 Closed in September 2012, M2 Apartments (“M2”) was joint venture equity investment in the development of a 298-unit apartment project located in the southwestern Denver suburb of Littleton, CO. Arris identified and partnered with a local development partner, who had built the last project to have been delivered in the submarket (10+ years prior). With land that was controlled and entitled in the previous downturn and fully bid construction costs reflective of an early cycle project, the projected investment basis in M2 was attractive and the un-trended yield on cost was projected at 7.5%, a 200-300 basis point spread to projected exit cap rates.

No competitive supply was under construction or in advanced planning at the time of closing. Further, wood frame construction and surface parking made for as simple a construction process with minimal execution risk as possible. Waterford Residential, a strong firm with a track record for similar executions, was contracted to manage the lease-up and operations of M2.

Our business plan called for breaking ground at joint venture closing and completing the project over an anticipated 18-month construction schedule. Due to the fact that we fully expected that eventually competitive supply would be entitled and built in the market, we projected selling the project upon stabilization.

After completion of the construction in early 2014, the project was stabilized at 97% occupancy in Q4 2014 (month 23 of the investment term). M2 was sold in Q1 2015.

Key Investment Stats