Colorado Real Estate Journal - October 21, 2015
Mark IV Capital Inc. has doubled the size of its Denver-area portfolio with the acquisition of 324,269 square feet of Class A office space on the Denver-Boulder corridor. The Newport Beach, California-based company paid $57 million, or $175.59 per sf, for Eldorado Ridge. The three-building property offers substantial upside – a rare quality given tenants’ appetite for Class A space. The buildings are approximately 80 percent occupied. Mark IV plans to immediately create six spec suites comprising 20,000 sf designed to appeal to today’s tenants. “Our plan to create spec suites with more open floor plans comes from the movement away from private perimeter offices in exchange for more collaboration areas that allow employees to choose where they work within the office,” said Evan Slavik, Mark IV Capital regional vice president. Suites will have private offices, but they will be pulled to the interior to allow natural light to penetrate the space and for greater access to mountain views. Eldorado Ridge is located on 21 acres at 10901, 11001 and 11101 W. 120th Ave. in Broomfield, adjacent to Rocky Mountain Metropolitan Airport and across the street from Interlocken and Flatiron Crossing mall. It’s part of the metro area’s northwest office submarket, which absorbed more space over the last five quarters than any other submarket in Denver, according to Geoff Baukol of CBRE, who handled the sale with CBRE’s Tim Richey, Mike Winn and Chad Flynn. “Mark IV Capital sees the Boulder corridor as an excellent fit for our long-term hold strategy,” said Slavik. “With the supply constraints of office space in the city of Boulder, we see Broomfield as the natural location for tenants looking for quality office space with plenty of accessible housing and retail amenities nearby.” The area is well positioned for long-term rental growth because of its growing population and tech influence, he said. Eldorado Ridge gives Mark IV Capital a sizable presence in the submarket. All of its other Denver-area assets are in the southeast suburban submarket, where it owns nearly 350,000 sf of predominantly Class A office space. A diverse tenant mix is one of the factors that attracted Mark IV to Eldorado Ridge, said Slavik. “All of Denver’s major industries are represented there,” he said. The largest tenants include Renewable Energy Systems, which occupies 39,000 sf; the University of Colorado with 19,000 sf; Regis University, an 18,000-sf tenant; and Office Evolution, which leases 11,000 sf. The buildings were built between 1999 and 2001. Baukol said it is unusual in today’s market to be able to acquire a Class A office asset that offers such substantial upside in leasing up the vacant space. “Our fundamentals are so strong, in particular for Class A product, it’s just hard to find Class A opportunities with that type of upside,” he said. “The quality, scale and upside opportunity created a very, very good amount of activity on the property,” he said, adding the offering attracted a full slate of national investors. The strength of the northwest corridor submarket also played a role in the level of investor interest, he said. The submarket had positive net absorption of approximately 497,000 sf over the past five quarters. “That is more than any submarket in Denver over that time period – that includes downtown, that includes southeast.” A big driver for much of the tenant activity is that the location allows companies to draw from a wider pool of employees than they could if they were in Boulder, which has a limited supply of, and more expensive, Class A office space, he said. Lease rates for Class A space in Boulder have increased more than 10 percent year over year, while rates in the northwest submarket have risen just 0.6 percent, according to CBRE. The northwest submarket’s lease rates are more than 20 percent higher than the metro Denver average. “The stability of lease rates in the northwest submarket speaks to the balance in supply of quality Class A product and demand from tenants who want to be a part of this vibrant tech corridor,” said CBRE’s Chris Phenicie, who, along with CBRE’s Blake Harris, will continue to handle leasing at Eldorado Ridge. Lowe Enterprises and a Starwood Capital Group affiliate sold Eldorado Ridge, which they acquired for $42 million in late 2012. It was 67 percent occupied at that time. Lowe Enterprises Real Estate Group oversaw property upgrades that included building a 5,000-sf amenity center with a deli, full fitness facility and conference center. Interiors were updated, with a particular emphasis on each building’s lobby, entrance and common areas. Lowe also improved the landscaping at Eldorado Ridge. Unum provided financing for Mark IV’s acquisition of the property. Westcap Corp. brought the lender to the deal. Kendra Mandarich of Mark IV Capital will manage the property.