Colorado Real Estate Journal - March 4, 2015
Having completed its mission at Logan Tower, DPC Development Co. put the 69,968-squarefoot building on the market and sold it for $10.5 million. “Our goal is to buy value-add and turn it into a core asset, and that’s what we did,” said DPC President Chris King. “We had completed our mission.” City Office REIT Inc., which focuses on owning high-quality office properties in attractive Southern and Western U.S. markets, purchased the building, which was 95 percent leased. That compares with 88 percent occupancy in 2012, when DPC bought the asset for $5.85 million and launched a major capital improvement plan. “We upgraded the building systems, the aesthetics of the building and were able to renew a majority of the lease turnover that was coming,” said King. “We leased quite a bit of the vacant space and pushed rents.” Located at 1580 Logan St., near the Colorado Capitol, Logan Tower consists of seven stories of office space above a four-story parking garage. Its 21 tenants include nine state agencies, including the Colorado Energy Office, Colorado Division of Water Resources and state Department of Education, among others. City Office REIT said it expects the building to generate an initial full-year cash net operating income yield of approximately 8 percent based on the purchase price. “Logan Tower is well located in Denver’s Uptown submarket and is adjacent to both the central business district and the state Capitol. The property was recently renovated and has a diversified and stable tenant base,” James Farrar, City Office REIT CEO, said in a statement. “The acquisition price is approximately $150 per square foot, which offers great value and a significant discount to replacement cost,” he said. “Logan Tower provides an attractive in-place cash flow in one of our key target markets with substantial upside as leases roll,” Farrar continued. “The current gross rental rate is approximately $18 per square foot, which is an estimated $5 per square foot below current market rates. Over the next five years, we expect to generate materially higher net operating income as under-market leases roll.” City Office REIT paid cash for the property, which will be contributed to its credit facility as an additional security. Transwestern Managing Directors Brad Cohen and Larry Thiel, along with DPC’s Justin Lutgen, handled the sale of the asset, which generated numerous offers, according to King. “The Uptown district is home to some of Denver’s most prominent landmarks and is considered one of the hippest neighborhoods in Denver, with a vibrant mix of urban culture and the impressive stretch of 17th Avenue’s Restaurant Row,” said Thiel. “Logan Tower’s recent performance is a testament to the area’s popularity,” he said. Vancouver, British Columbia, Canada-based City Office REIT is the third owner that Logan Tower has had since it was built in 1986. The company also owns the Plaza 25 office complex in Greenwood Village.