Colorado Real Estate Journal -
In July, New York-based Northwood Investors, with no fanfare, bought the 900,000-square-foot Southlands Town Center in Aurora. The sale only became public several months later, when Northwood Investors announced the purchase of the center that had been developed by Denver-based Alberta Development and built in phases, starting in 2005. "We are pleased to make our first investment in Colorado and excited about the longterm prospects in the region,” John Kukral, president and CEO of Northwood, said recently. “This acquisition demonstrates our commitment to retail excellence and we hope to further build upon the quality retailers and restaurants currently established in the center,” Kukral said. Northwood did not disclose the purchase price. Public records, however, indicate that Northwood Investors paid $102.5 million. There were two deeds of trust issued for the purchase – one for $79.5 million and the other for $23 million. Industry experts estimate that the replacement value of the giant center would be around $180 million. The purchase price also is far below what the property sold for four years ago. In 2008, public records show, Alberta Development sold the center to Granite Southlands Center LLC for $161.17 million. Granite Southlands is a BlackRock Inc.-affiliated company. Indeed, the public documents for the most recent sale list Granite Southlands Center LLC as the seller, in care of BlackRock Real Estate Advisors in New York. Eric Tupler, senior managing director of Denver’s HFF office, and Travis Anderson, managing director of HFF’s Dallas office, arranged the loan for the most recent purchase. Tupler declined to confirm the sales price or the loan amount. The purchase is believed to be the largest third-party, armslength sale of a retail center in the Denver area this year. HFF placed the five-year loan with CIBC World Markets, which is the wholesale banking arm of the Canadian Imperial Bank of Congress. The bank, with a $31.3 billion market cap, is based in Toronto. “There was a lot of interest in it” from lenders, Tupler said. “We chose the lender that provided the best of all worlds. It had strong pricing and flexible terms that will allow the new owner to improve and stabilize the asset.” Southlands Town Center is an outdoor lifestyle center with 730,000 sf of retail space and 170,000 sf of office space. Its four-block main street and community plaza are surrounded by retailers and restaurants including AMC Theaters, Bed Bath & Beyond, Sports Authority, Ross, Barnes & Noble, Ulta, Victoria’s Secret, White House Black Market, Charming Charlie, American Eagle Outfitters, Gymboree, Old Chicago, Ted’s Montana Grill and others. Originally designed by Callison Architects, the center opened its first store in 2005. Today, Southlands Town Center has more than 100 retailers and restaurants. It was 81 percent occupied at the time of the sale, providing the new owner with a lot of upside potential, according to retail experts. Despite the interest in Southlands from lenders, such big retail deals are tough in this environment, Tupler said. “I would say that retail is still the toughest asset class,” Tupler said. “Lenders love groceryanchored centers, but everything else is tough.” Lenders, he said, like plainvanilla assets that are easy to understand. “Southlands is almost two centers – it is obviously a bigbox center, but it also is a lifestyle center, with a secondary use as an office center,” Tupler said. Lenders, he said, worry about the “long-term sustainability of tenants,” especially large ones, in big centers. It also is more difficult to do large retail deals since the national real estate downturn, he said. Despite the challenges for a large retail center with a lot of different components, the Southlands Town Center stood out because of its quality and location near E-470. “There was deep interest from banks and life insurance companies for Southlands because it truly is at Main and Main,” Tupler said. “It is the retail anchor for that part of the metro area and it has great access to a lot of rooftops.” Northwood Investors is a privately held global real estate investment firm with more than $2 billion of real estate assets. Northwood has a fundamental, value-driven investment strategy with a longer-term outlook. It has worldwide holdings including office buildings, shopping centers and hotels. It is interested in expanding its footprint in the Denver area by acquiring more assets beyond Southlands, Tupler said.