Colorado Real Estate Journal -
Peter Keepper at Essex Financial Group recently originated a $39 million loan for 188 Inverness, a Class A office building in the Inverness Business Park that represents one of the best turnaround stories along the southeast corridor in recent years. The refinancing of the debt is on behalf of Corporex. Corporex bought the 257,220-square-foot building in 2004 for $19.35 million from US West, the former phone company that served Colorado and was later replaced by Qwest. Qwest, in turn, was sold to Century Link. The Inverness property was a build-to-suit for US West in 1990, but US West had vacated it, leaving it 100 percent empty when Corporex bought it. Today, it is 92 percent leased, with the anchor tenant being locally based Catholic Health Initiatives, the nation’s second-largest faith-based hospital system. CHI accounts for about 40 percent of the square footage in the building, and more than 70 percent of the space is occupied by tenants with investment-grade credit, Keepper said. CHI reported more than $15 billion in total assets in 2012, compared with $13.9 billion in 2011. Last year, CHI, which nationwide owns 78 hospitals and 40 long-care assisted-living facilities, reported $9.8 billion in operating revenues, compared with $8.8 billion in 2011. It employed 83,700 at the end of last year. “CHI is a true investment-grade company,” Keepper said. Sun Life originated the 10-year fixed-rate loan amortized over 30 years for 188 Inverness. Sun Life also funded a similar size loan for Corporex’s Fitzsimmons 100 office building earlier in 2012. Essex has exclusively represented Sun Life in Colorado for more than a dozen years. “This was submitted to a lot of lenders and there was a significant amount of interest in it,” Keepper said. “I think Corporex chose Sun Life because of prior, existing relationships with the company and because of the terms it offered.” Keepper said that Corporex hit a home run when it bought 188 Inverness. “Obviously, there is risk when you buy a building that is 100 percent vacant,” Keepper said. “They bought it a time when I believe the overall office vacancy rate in the tech center area was over 20 percent. You really have to tip your hat to Corporex.” He said both Corporex and Sun Life like 188 Inverness for the same reasons – the quality of the building, the location and the Inverness Business Park itself. “It is a very well-maintained building with very functional floor plates,” Keepper said. “It has a phenomenal cafeteria that is almost like a full-service restaurant. A lot of people next door at 198 Inverness who work for CHI eat lunch at that cafeteria.” The Inverness Business Park also has a great reputation, he said. “The business park itself is considered one of the nicest in the entire metro area,” Keepper said. Last year, Essex did a record $225 million in loans for office buildings along the southeast corridor. About 70 percent of the transactions were for refinances, but in terms of dollar volume, more than half was for acquisitions. One acquisition, for example, accounted for about 25 percent of the dollar volume. Keepper said it appears that lenders’ appetite for commercial real estate in the Denver area, both along the southeast corridor and in downtown, will continue in 2013. “Interest in the Denver metro area is very strong,” Keepper said. “In terms of investor demand from institutional lenders, Denver is right behind the coastal cities.” Much of the interest is because Denver has a healthy economy and is able to attract employees, even though a huge growth spike isn’t expected, he said. “We’re going to have good growth, but not rapid growth,” Keepper said. “But we’re not like a lot of Midwestern markets that are just very soft.” In this low-rate environment, lenders can make more money through “alternative investments” in refinancing existing commercial loans and providing money for acquisitions than by buying notes issued by Class A companies, he said. “The dynamics in Denver and Colorado right now are such that institutional lenders want to shift more of their investments here. We’re going to see more money coming here in all product types that fit the criteria of individual lenders. We’re even starting to see an imbalance between supply and demand, where there is more demand than supply.”