Colorado Real Estate Journal - March 18, 2015
The Denver office of HFF recently arranged a $23.55 million acquisition loan for Quebec Square in Stapleton. Quebec Square is a 207,561-square-foot regional retail center at 7800 Smith Road. HFF represented the buyer, Inland American Real Estate Trust Inc. Inland, based in Oak Brook, Illinois, paid $52.25 million for the property, which included an adjacent 20,000 sf of space. “We believe Quebec Square is a dominant retail property with a solid national and regional tenant lineup, strong demographics and an ideal location trafficked by more than 65,000 vehicles per day,” said Christopher Covey, senior vice president of transactions for Inland American. “We are pleased to add this property to our retail portfolio, as it matches our long-term strategy of investing in multitenant, necessity-based retail properties and believe it is well positioned for future growth.” Inland initially paid cash for the center and then HFF arranged for the loan, said Eric Tupler, the senior managing director for HFF’s Denver office. That is typical for many real estate investment trusts, such as Inland, said Tupler, who arranged the loan with HFF Real Estate Analyst Matt Gangaware. Working on behalf of Inland American Real Estate Trust Inc., HFF placed the 10-year, fixedrate loan with Nationwide Real Estate Investments. HFF also will service the loan. “There was quite a bit of interest in this transaction both from life insurance companies and CMBS lenders,” Tupler said. He said the lenders that looked at the deal were thrilled that Quebec Square is in Stapleton, one of the most successful mixed-use, master-planned communities in the U.S. “They really liked the location and everything in Stapleton that is around Quebec Square,” Tupler said. “It truly is one of the strongest submarkets in Denver,” Tupler said. “Stapleton is a primary trade area for that whole northeast sector of Denver,” Tupler said. And the site will only become stronger, as a nearby train station will open in 2016, when the line between Denver International Airport and Union Station opens, Tupler noted. “Quebec Square, itself, has become a true infill center, as Stapleton has grown,” he added. Quebec Square was built in 2003 on slightly more than 22 acres. The property is 97 percent leased to national retail and restaurant tenants. Ross Dress for Less, Office Depot, PetSmart, GameStop, Buffalo Wild Wings, Smashburger, GNC, Famous Footwear and Jimmy John's are among the tenants at Quebec Square. “Lenders liked that they had very strong national tenants,” Tupler said. “And although Walmart Sam’s Club and the Home Depot, were not included the transaction, lenders liked that these big-box tenants shadow anchor the tenants included in the purchase and drive traffic to Quebec Square,” Tupler said. He noted that the loan is interest-only for the entire 10-year term. “By not amortizing the loan, Inland received a rate that is probably 300 to 400 basis points lower than an amortized loan,” Tupler said. “They received a very low interest rate,” he said. Also, it is a very conservative loan-to-value transaction. “That is typical when REITs get financing,” Tupler said. “They like to be very conservative. They tend to stay away from highly leveraged loans,” Tupler said. The low leverage also allows REITs to receive very good deals, like Inland did with the Quebec Square loan, he said.