CREJ - page 22

Page 22 —

COLORADO REAL ESTATE JOURNAL

— October 15-November 4, 2014

Finance

by John Rebchook

Denver-based Essex Finan-

cial Group recently arranged

an $85.13 million refinance of

a 19-property, 1.95-million-

square-foot industrial portfolio

along the Front Range.

The longtime owner of the

properties is Denver-based

Etkin Johnson Real Estate Part-

ners.

The lender was TIAA-CREF,

according to Etkin Johnson.

TIAA-CREF is a longtime cor-

respondent life insurance com-

pany with Essex.

The refinance was handled

by Jeff Riggs and Mike Jeffries,

who

are,

respectively,

the president

and a princi-

pal of Essex.

The10-year,

nonrecourse

loan for the

63 percent

loan-to-value

t ransac t i on

has an inter-

est rate of 4.45 percent. The

loan is amortized over 30 years.

The properties, known as the

Colorado Industrial Portfolio,

or CIP, are located from Boul-

der to Colorado Springs and

range in size from 26,078 sf to

293,150 sf.

“The Essex team did an excel-

lent job helping us navigate

through this process and suc-

cessfully closing the financ-

ing,” said Aaron Johnson, Etkin

Johnson’s vice president of

investments.

“They played an important

role in our financial strategy,”

Johnson added.

TIAA-CREF had refinanced

the loan several times in the

past, allowing Etkin Johnson to

take advantage of falling inter-

est rates.

“This is the third time we

have done a transaction for

these properties with this par-

ticular insurance company,”

Jeffries said.

The current loan was matur-

ing at the end of the year.

“We, like everyone else, think

that interest rates are going to

shoot up, although it hasn’t

happened yet,” Jeffries said.

After meeting with Etkin

Johnson and the lender, the best

strategy was apparent: “Let’s

get a great rate locked in before

the party is over,” Jeffries said.

The refinance into a lower

interest rate will increase Etkin

Johnson’s cash flow by $2 mil-

lion per year.

The company also intends to

use a portion of the excess cash

from the refinance to address

near-term capital improve-

ments as well as establish a

working capital reserve.

“CIP has been a big winner

for Etkin Johnson and its inves-

tors,” said David Johnson, pres-

ident of Etkin Johnson.

“Our investors have achieved

more than double their return

on capital and we look forward

to increasing their returns over

the next several years,” John-

son said.

There would have been a lot

of lenders interested in refi-

nancing the portfolio if it had

been shopped to the entire mar-

ket, according to Jeffries.

Since TIAA-CREF originally

made the first loan 17 years

ago, “The plan was to give the

lender the first crack at refi-

nancing it,” Jeffries said.

“If that didn’t work out, we

would have gone to the mar-

ket. But the existing lender pro-

vided a great rate with great

terms.”

When the process began,

there were 20 buildings in the

portfolio, which had a total of

about 2 million sf, but Etkin

Johnson sold one.

“That complicated the deal

a bit as far as allocating the

dollars to each property,” Jef-

fries said, but that issue was

addressed and resolved.

Etkin Johnson acquired the

properties between 1990 and

1998.

“They run the gamut from

high-finish buildings that have

got low finishes to low finish-

es with high ceilings,” Jeffries

said. “There are a few single-

tenant buildings, but most of

them are multitenant buildings.

In total, they probably have 175

different tenants.”

The one sale from the original

portfolio was for a single-tenant

building. The tenant wanted to

be an owner-occupant.

“He probably paid more than

the market value for it,” Jeffries

said. “It was one of those deals

where he would say, ‘I can

buy it for $100 per square foot,

which is a bit above the market,

but I know I can’t build a new

building for $100 per square

foot, so it makes sense.’”

Overall, the portfolio was

about 94 perent leased at the

time of the sale, a bit above its

historic average of 90 percent

to 92 percent, he said. Twelve

of the properties are 100 per-

cent leased.

“I’m very pleased with the

extraordinary work and dedi-

cation of our entire team that

led to this financing,” said

Bruce Etkin, chairman of Etkin

Johnson.

His namesake company

prides itself on taking care of

its tenants.

“With a focus on best-in-class

management, preventive main-

tenance and responsive service,

we’ve optimized tenant loyalty

and maintained the assets in a

superior condition,” Etkin said.

“This steadfast commitment

from our associates, inves-

tors and tenants has allowed

us to maximize the portfolio’s

long-term growth, income and

stakeholder value,” said Etkin,

whose company’s entire port-

folio includes 5 million sf of

office, retail, apartments, hotel

and industrial holdings worth

more than $500 million.

In addition to the CIP loan,

Etkin Johnson has secured

another $56 million in financ-

ing through a variety of life

companies and banks for four

industrial/flex properties in

Colorado Technology Center,

three assets at Lafayette Cor-

porate Center along with three

buildings and nearly 18 acres

at Church Ranch Business Cen-

ter, rounding out the year-to-

date loan volume of more than

$141 million.

“This is a great time to take

advantage of today’s capi-

tal markets and low interest

rates,” David Johnson said.

“In addition to the financing

we’ve secured year to date, we

anticipate refinancing another

$60 million before year-end,”

said Johnson.

If Etkin Johnson ever want-

ed to sell the portfolio, there

would be plenty of buyers, Jef-

fries said.

“I think stategically, it is their

intention to keep it for the long

term,” Jeffries said.

He estimated the value of the

entire portfolio at about $150

million.

“If they were going to sell the

portfolio, there would be a lot

of big players interested in a

$150 million, diversified port-

folio across a wide geograph-

ic area, as opposed to paying

$150 million for one asset in

downtown,” he said.

He also said it is always pos-

sible that there will be a “one-

off” sale here and there, such

as property that sold to the

tenant after the refinance pro-

cess began.

Other News

Monica Newman,

First

Vice President of

CBRE Capital

Markets

in Denver, was part

of a CBRE team that closed

a $30.1 million, nonrecourse

construction loan for a 298-

unit apartment commnity in

Columbia, South Carolina.

Essex arranges $85 million loan

Shown is one of the properties that Etkin Johnson recently refinanced.

Mike Jeffries

For Company Profiles, Contact

Information & Links, Please Visit

www.crej.com

Commercial Real Estate

Lenders

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