Colorado Real Estate Journal - December 3, 2014
A lender could check off just about every box for making an acquisition loan for the Park Place office building. Great location in the Denver Tech Center. Check. Strong buyer with an impressive portfolio and track record. Check. Strong tenant mix in the building. Check. Rents below market, with potential for upside. Check. Building purchased at far below the replacement cost. Check. And the list goes on, said Peter Keepper, managing principal of Denver-based Essex Financial Group. Keepper recently arranged a $21.3 million acquisition loan for Park Place, an office building at DTC Boulevard and Yosemite Street. The building has 176,720 square feet of rentable space. Denver-based Toma West bought the six-story building at 5690 DTC Parkway for $30.5 million. “There was a lot of interest from lenders” on the deal, Keepper said. “The best economics came from a CMBS lender,” he said. The lender was no stranger to Toma West, founded in 2006 by Kenneth Grant, a Norwegian entrepreneur who now controls an office portfolio of about 1.5 million sf, including buildings along the southeast corridor, in downtown Denver, Lakewood and New York City. “This was the third or fourth deal this lender had done with the borrower,” Keepper said. The same lender provided a loan when Toma West purchased the nearby Orchard Falls building, and 300 and 390 Union Boulevard buildings in Lakewood. “The lender had a very good relationship with the borrower,” Keepper said. The lender also liked the building. “It is a stabilized building and it has upside,” Keepper said. “Overall, rents are about 10 percent below market, so there is an opportunity to raise rents as they expire.” Also, Class B buildings along the southeast corridor have been experiencing an average of a 10 percent annual rent jump, he said. “The market is tight and there (aren’t) a lot of places to go,” Keepper said. While some new office towers are on the drawing board, nothing has been built recently, he said. The biggest tenant in Park Place is the Breakaway Group, which provides information technology solutions to the health care industry. It takes 18 percent of the building, he said. Another tenant is Kentwood Real Estate. “Kentwood has been there for a long time,” Keepper said. “They’ve been there since at least 1998.” Denver-based Titan Investments and Chicago-based Hamilton Partners, the sellers, did a great job with the building, he said. Titan and Hamilton bought the building in 2006 with funding from the Dubai Investment Group, which had ties to the crown prince of Dubai. “The building has this weird plaza space that was really underutilized and they redesigned it so you can actually drive through it and use it for parking,” Keepper said. “It was a very creative solution,” he said. “The building doesn’t have any significant deferred maintenance that needs upgrading,” Keepper said. Toma West also bought Park Place far below replacement cost, he said. “They paid about $170 per square foot and I would say it would cost north of $300 (per square foot) to replace,” Keeper said, primarily because of the structured parking. “If you were able to do surface parking, you could probably replace a building for around $250 per square foot,” he said. Earlier, Toma West purchased the nearby Orchard Falls building. “I think Toma West realized by having buildings so close to each other, it provided them some economies of scale,” Keepper said. “Toma West does a really good job of buying and operating buildings, which is something the lender appreciated.”