July 15-August 4, 2015 —
COLORADO REAL ESTATE JOURNAL
— Page 17
Finance/Appraisal
T
here is a historic phe-
nomenon occurring,
which is changing the
face of commercial real estate,
and few are doing anything
about it. Right before our eyes,
we are witnessing the greatest
transfer of real estate assets in
the history of our country.
This transfer of assets is tied
to middle-market commercial
real estate and the ownership
base of this real estate. The
ownership base of middle-mar-
ket assets is typically individu-
als or a partnership of indi-
viduals. The majority of this
ownership base is aging baby
boomers, between the ages of
51 and 70. Thus, the ownership
of these assets is explicitly tied
to the “graying of America.”
Middle-market commercial
real estate represents the major-
ity of commercial real estate
properties in the country and
accounts for more than half
of commercial real estate in
value. According to the Federal
Reserve, the value of commer-
cial real estate in the United
States is $15 trillion, of which
$7.6 trillion is middle-market
properties with values under
$50 million.
The trends in the graying of
commercial real estate reflect
larger demographic trends in
the U.S. relating to the aging
baby boomer generation.
According to the U.S. Census:
• Baby boomers make up 24
percent of the current popula-
tion;
• 2.5 million males and 1.5
million women will pass away
over the next five years;
• The average baby boomer
age is 58; it will be 64 in 2020;
• Every day for the next 16
years 10,000 baby boomers will
turn 65; and
• Sixty to
80 percent
of
boom-
ers want to
move once
they retire,
stimulating
commercial
real
estate
transitions.
According
to the New
York Times,
this graying
of America is happening faster
than anticipated.
“While demographers have
long projected a significantly
older country later this century,
declines in fertility and mortal-
ity rates are hastening the shift,
leading to what are expected to
be profound changes for issues
ranging from Social Security
and health care to education.
Signs of the change are under-
way: The Villages, a city in
central Florida with a large
retirement community, was
the nation’s fastest-growing
metropolitan area from 2012 to
2013, according to the Census
Bureau.”
Over the next 10 to 15 years,
due to the aging ownership
profile of middle-market com-
mercial real estate, almost
every asset will change own-
ership because of life events,
such as death, retirement,
health issues, etc. Even if these
assets are transferred within
the family, new ownership will
be compelled to manage, sell,
improve, etc., this real estate.
This transfer of ownership
is an unprecedented opportu-
nity for those who specialize
in middle-market commercial
real estate. In addition to an
aging real estate ownership
base, there continues to be a
lack of liquidity for middle-
market real estate from both
capital providers and sponsors.
Less capital is available to the
middle market as banks have
tighter regulations.
Large real estate funds do
not typically invest in the
middle-market range, thus the
owners of this real estate have
limited access to institutional
capital. There are few, if any,
institutional-quality managers
that are exclusively focused on
middle-market real estate. This
vacuum provides opportuni-
ties for middle-market capital
providers to earn above-aver-
age risk-adjusted returns. His-
torically, this space has provid-
ed better deal flow, pricing and
structures for capital providers.
Steve Sadler, CEO of Alle-
giancy, noted, “The middle
market is much more the pur-
view regional players, with
knowledge on the ground ...
and we have to be more well-
versed in the middle markets.”
Yes, middle-market players
are regional ... and aging. Tap-
ping into the aging ownership
of middle-market properties
gives rise to a whole new set of
opportunities and issues, such
as death, succession, divorce,
liquidity and partnership
issues. These life events are
significant drivers of middle-
market real estate transactions.
Clearly, the “graying of com-
mercial real estate” presents
enormous opportunities for
those with capital, knowledge
and foresight to tap into these
significant demographic and
generational shifts in the U.S.
s
Jay Rollins
President and CEO,
JCR Capital, Denver
Other News
n
In another
HFF
deal, its
Denver office recently secured
$45 million in financing for the
Parc at Cherry Creek, a 408-
unit, garden-style apartment
community in Denver.
HFF worked on behalf of
PCC Partners LLC
and
Iron
River Management LLC
to
secure the 10-year, 3.89 percent,
fixed-rate loan with five years
interest only through
Freddie
Mac’s
CME Program. The secu-
ritized loan will be serviced by
HFF through its Freddie Mac
Program Plus Seller/Servicer
program.
The Parc at Cherry Creek
offers three floor plans ranging
from 782 to 1,089 square feet.
Community
amenities
include a 24-hour fitness cen-
ter, pool and spa, gas grills in
the pool area, tennis and bas-
ketball courts, sand volleyball
court, DVD library, clubhouse,
detached garages, gas fire pit
and Internet café with Wi-Fi.
Park at Cherry Creek is on
almost 20 acres at 7555 East
Warren Drive in southeast
Denver. The community is
within walking distance to
retail shops, restaurants and
Cherry Creek Country Club,
and is about 7.4 miles from
downtown Denver.
Managing director Josh
Simon and real estate analyst
Kristian Lichtenfels led the
HFF debt placement team rep-
resenting the borrower.
“Given that we are witness-
ing the sunset of the currently
favorable interest rate environ-
ment, it’s smart business for
our team to make this move,”
said
Jonathan Ringham,
man-
ager of PCC Partners LLC and
president of Iron River Man-
agement LLC.
“Locking in this low rate for
the next decade provides enor-
mous flexibility in our future
operations,” Ringham said.
“HFF was instrumental to us
as a partner in getting this deal
done from beginning to end.”
n
FirstBank,
Colorado’s
largest locally owned bank,
recently provided an $8.95
million financing package to
Tim White
and
Doug Decker,
principals of The Move LLC.
White and Decker will use the
funds to develop “The Move,”
a 50,000-sf office at building
at 202 Sixth St. in downtown
Castle Rock. The project, which
will be built by the White Con-
struction Group, will include a
below-ground parking garage
and several energy-saving
features, including 8,646 sf of
solar panels.
“We’ve managed construc-
tion projects across the Rocky
Mountain Region for 30 years,
and have always preferred to
partner with other Colorado-
proud companies to make
buildings like ‘The Move’ a
reality,” said White, founder
and president of White Con-
struction Group.
“FirstBank has a long his-
tory of supporting businesses
across Colorado, and the com-
pany has been a great part-
ner to us during this process,”
White said.
The financing package will
allow White Construction
Group to build the first-of-its-
kind office building in down-
town Castle Rock.
The Move is being designed
by Barker Rinker Seacat Archi-
tecture.
The Move will feature mul-
tiple overhead doors, effec-
tively bringing the outdoors
into the building, and modern,
energy-efficient mechanical,
engineering and plumbing sys-
tems to provide lower energy
consumption. It also will have
74 parking spaces with bicy-
cle parking and a large, open
office floor plan.
The development will be
the first building in down-
town Castle Rock to feature
solar panels. The solar panels
will offset about 20 percent of
the building’s electric energy
consumption.
s
Commercial Real Estate
Lenders
Directory
COMMERCIAL REAL ESTATE LENDERS DIRECTORY
If you would like to include your firm in this directory,
please contact Jon Stern at 303-623-1148 or
.
@
Academy Bank
Acre Capital LLC
Bank of Colorado
Bank of the West
Berkadia Commercial
Mortgage, LLC
Capital Source
CBRE|Capital Markets
Chase Commercial Term Lending
Colorado Business Bank
Colorado Lending Source
Commerce Bank
Commercial Federal Bank
Essex Financial Group
Fairview Commercial Lending
FirstBank Holding Company
Front Range Bank
Grandbridge Real Estate Capital LLC
Hunt Mortgage Group
JCR Capital
Johnson Capital
JVSC-CBRE Capital Markets
KeyBank N.A., Key Commercial
Mortgage Inc.
Merchants Mortgage and Trust Corp.
Midland States Bank
Montegra Capital Resources,
Private Lender
Mutual of Omaha Bank
NorthMarq Capital, Inc.
RNB Lending Group
TCF Bank
Terrix Financial Corporation
Trans Lending Corporation
U.S. Bank – Commercial Real Estate
U.S. Bank SBA Division
Vectra Bank Colorado, N.A.
Wells Fargo SBA Lending
Wells Fargo N.A. – Commercial
Real Estate Group
