Colorado Real Estate Journal - March 5, 2014
Raindrop Partners knew it was making a great real estate play even before signing a lease that is, by Colorado standards, enormous. The Denver-based company leased 1 million square feet to a national flower grower within two weeks of buying the former Color Star Growers properties in Fort Lupton. It saved a whole lot of Easter lilies in the process. “As soon as word got out that we were the new owners of these buildings, our phones started ringing off the hook. There was significant interest from flower growers who were vying to take the place of Color Star in this market,” said Jordan Scharg, a principal in Raindrop Partners. Color Star, which filed for Chapter 11 bankruptcy in December, owned two properties in Fort Lupton with 33 acres of flower greenhouses and 130 acres of industrial and agricultural land. The company supplied flowers to grocery stores and flower retailers throughout the Rocky Mountain region. The glass greenhouses, 900,000 and 600,000 sf, are so big that workers ride bikes, tractors and forklifts to get from one part of a building to another. Raindrop Partners, in a whirlwind deal, competed against seven other bidders to buy the properties at auction. It paid $2.2 million, a fraction of the value. “We had two weeks to make a binding offer from the time that we first looked at the opportunity,” said Scharg, explaining the bankruptcy court drove timing. Raindrop Partners hired around 40 former Color Star employees to keep flowers growing, including lilies for the upcoming Easter season, until the new tenant stepped in. Many of those who once worked for Color Star Growers now work for the new tenant, which signed a 10½-year lease. The tenant’s name hasn’t been released. Demand for local and organic foods also is huge in Colorado, and, according to Scharg, the capital costs to develop new facilities are prohibitive for growers. Raindrop Partners and affiliate Circle Fresh Farms, a network of local organic produce growers, are discussing the possibility that Circle Fresh will occupy the remaining greenhouse space. “We saw this as an opportunity to expand those operations, and it was also a very good real estate deal,” said Raindrop Partners Principal Zach Frisch. “I think it’s a nice marriage between the operating business and the real estate investment strategy,” added Doug Elenowitz, who joined Raindrop Partners as a principal last year to lead its growth in real estate acquisitions and urban mixed-use development. Although it invests in commercial real estate, Raindrop isn’t a typical buyer. It is a private investment and advisory firm focused on business opportunities and real estate assets that are sustainable, energy efficient or that help fulfill basic human needs for things like water, energy and food. Its companies include Colorado Barricade, which supports the transportation and real estate sectors. On the real estate asset side, the 7-year-old company has invested in agricultural properties, including a teak plantation, and sustainable resort communities in Costa Rica. Currently focused on Colorado, specifically within a 150- mile radius of Denver, it wants to invest in $5 million to $10 million in income-producing properties over the next 24 to 26 months, undertake one or two new urban redevelopment projects per year and operate real estate that is synergist with other Raindrop Partners companies. The company will invest in industrial, warehouse, retail, hotel and mixed-use properties where it can add value through resolution of the current capital structure, or by completing physical improvements, leasing existing vacancy, and redeveloping or expanding existing properties. Investments could take the form of acquisitions, joint ventures, sale-leasebacks and fee development. Raindrop is targeting transactions with a five- to 10-year holding period. Its transaction profile includes value-add commercial properties in the path of revitalization; existing assets or redevelopment and conversion opportunities; assets at 70 percent or less of replacement value; vacant and partially leased buildings with rollover or lease-up exposure; real-estate owned properties and distressed or nonperforming mortgages; transactions requiring a quick closing; and fee development for complex urban infill redevelopment projects. The company recently acquired a nonperforming note collateralized by land in a prime redevelopment area next to Denver’s central business district, which it plans to repurpose and develop. It also is in the design charrette stage for a “living building,” a Class A commercial building that would function off the grid. The project is inspired by the Bullitt Center in Seattle, considered the world’s most sustainable building. Raindrop Partners’ management team includes Richard Naha, CEO of Circle Fresh Farms, whose background includes real estate development and investment. Frisch also has real estate expertise, as well as a background in clean technology and global telecommunications. Scharg is a former managing director of Braddock Capital Management and director at Anschutz Investment Co., and Elenowitz previously was executive vice president and director of development for EnvironFinace Group, a development company that acquires, remediates and repositions environmentally impaired real estate.