Colorado Real Estate Journal - January 6, 2016
Veteran real estate broker and real estate investor Eugene R. Lucero, best known for his investments in North Denver, recently bought a retail center in Aurora. But his longtime ties in North Denver and the purchase of a strip center in Aurora are linked. Earlier this year, Lucero sold a prime piece of land in West Highland to Trammell Crow Residential. Trammell Crow Residential is developing a Class A, five-story, 322-unit building on the 126,239-square-foot site at West 38th Avenue and Lowell Boulevard. Records show Lucero sold the property for $11.29 million. “Gene took some of the proceeds from that big land sale to buy Tower Pavilions in a 1031 exchange,” said broker John V. Propp. Propp, meanwhile, had listed the 10-year-old, 100 percent-occupied Tower Pavilions at 3571 S. Tower Road in Aurora. “I was talking to Gene and I said, ‘Gene, I’ve got a great deal for you,’” Propp said. Lucero, through Sonrisa Holding LLC, which he owns with his wife, paid $4.22 million for Tower Pavilions. That equates to $382.17 per sf. “It was a bit more than I would have liked to pay, but it is a seller’s market,” Lucero said. He was drawn to the center because, “It is a good, high-traffic location. That whole area is just a beehive of activity.” About 65,500 vehicles pass it every day. Also, it is next to one of the busiest Starbucks in the area, according to Lucero. He said the Starbucks has been used for beta testing new products. Indeed, Propp got the listing when he was selling a Starbucks and a Chase Bank adjacent to Tower Pavilions. He asked the owners of Tower Pavilions if they were interested in buying the Starbucks property. Instead, the owners told Propp they would be more interested in selling Tower Pavilions. Propp had it under contract a couple of times, “but they didn’t stick” because the sellers were saddled with a hefty prepayment penalty on their loan, he said. However, as time passed, they were eager to close the deal by the year-end. “The seller kind of bit the bullet on the prepayment penalty,” Propp said. “And, honestly, it was kind of a couple-of-hundred-of-thousand-dollars bullet.” He said Lucero considered assuming the loan. Instead, FirstBank provided a 65 percent loan to value loan on the property, he said. “If he assumed the loan, he would have to get another one in 18 months,” Propp said. “Given the kind of money available in today’s market, it didn’t make sense to assume the existing loan,” Propp explained. Lucero also benefitted in that Propp didn’t list Tower Pavilions to the entire market. “The sellers didn’t think they had to squeeze every penny out of it,” Propp said. “But Gene didn’t steal it,” he said. “He paid a fair and equitable price.” The property is 100 leased to eight tenants. They include European Wax Center, Elements Therapeutic Massage and Jersey Mike’s. “It has pretty good tenants,” Propp said. “This is not a value-add deal; this is a cash-flow deal,” he said. Lucero said one of the nice things about the building is that the stores are relatively small. “So if you have a vacancy, it doesn’t hurt you too much while you are waiting to re-lease it,” he said. Lucero said the transaction fits in well with his 1031 portfolio. “I needed a certain amount of debt and a certain sales price, and this served that role perfectly,” Lucero said. The area also has pretty strong demographics. There are 53,632 households within a 3-mile radius. The median household income within a 3-mile radius is $68,653 and the average household income in the same radius is $84,855. The purchase of a suburban property is a bit of a departure for Lucero. “Over the years, most of my real estate investments have been in North Denver,” Lucero said. In fact, he will own the residential portion of the West Alexan apartment community that Trammell Crow is developing on West 38th Avenue and Lowell Boulevard. He also has had experience in doing deals in Aurora. “Years ago, I sold residential homes in Aurora and I’ve brokered some small commercial buildings in Aurora,” he said. Lucero has hired John Propp Commercial Group to manage and lease Tower Pavilions. “He’s an experienced broker and knows what he is doing,” Lucero said. “We’ve known each other for years, but I would say we’ve grown closer and become better friends through this transaction.” Propp said these types of retail centers are extremely sought after by investors. “If I had 100 of them, I could sell 101,” Propp said. Other News An unidentified California based buyer paid more than $2.5 million for a 3,586-square-foot Wendy’s in Westminster. SP Colorado Food Services sold the property for less than a 5 percent cap rate, the lowest ever recorded for a Wendy’s in the market, according to the CBRE brokers who listed and sold the property. CBRE broker Mike Kendall of Denver listed the property at 4860 W. 120th Ave. with Los Angeles-based CBRE retail experts Alex Kozakov, Patrick Wade and Eric Roy. “Similar deals have traded around 5.5 percent to 5.75 percent cap rates,” Kozakov said. “Of the Wendy’s that have sold, this one is the lowest cap rate nationally in the last five years,” he added. Renovated earlier this year, Wendy’s recently signed a 20-year, triple-net lease to occupy the building. The building is shadow-anchored by a Sprouts, Big Lots and Walgreens-anchored center. An average of 37,000 vehicles pass it each day. “This property benefits from its high-growth Denver submarket location,” Wade said. “There are more than 14,500 residents with an $110,000 average household income within a 1-mile radius. We are selling these out-of-state deals to California-based buyers chasing higher yields than those they can get in their local markets.” This was the second Wendy’s property in the Denver submarket sold by the team within the past month. The other Wendy’s in Lafayette sold for almost $2.8 million. It also was sold to a private, California-based buyer.