Colorado Real Estate Journal - April 6, 2016
Jeff Johnson and Matt Ritter of Pinnacle Real Estate Advisors recently represented a partnership that paid $5.35 million for a 43,770-square-foot shopping center at the western edge of Wheat Ridge. The buyer of Independence Square at 4980 and 4990 Kipling St., just north of Interstate 70, is a tenant-in-common partnership of a trust and a limited liability corporation, Johnson said. The principals behind the group are experienced buyers of infill centers in the area such as Independence Square, he said. One partner was in a 1031 exchange and the other was not. The $122.05 per sf the group paid is far below replacement cost, Johnson said. “I think this is going to be a phenomenal opportunity for them,” Johnson said. “It’s a great retail location,” he said. The main reason that the group received such a sweet deal is that the center has a high vacancy rate of about 22 percent. “They have a vacancy rate around 25 percent at a time the overall retail vacancy rate is around 7 percent,” Johnson said. That provides a lot of upside potential if the remainder of the space is leased, he said. “The previous owner, in my opinion, did a pretty nice job with the maintenance of it, except the buildings need a new roof,” Johnson said. The current owners have budgeted for a new roof, he said. However, the previous owners didn’t do such a great job with the property management and leasing, he said. The new owners have hired a sister company, Pinnacle Real Estate Management, to take over the management and leasing, he said. They already have several letters of intent. “Pinnacle Property Management turned around a similar center at 20th and Wadsworth, and frankly, this one is in better shape and has a far better location,” he said. The demographics are strong for Independence Square. Within a 3-mile radius there is a population of 110,884 and an average household income of $73,301, according to research by the listing brokers, Brad Cohen and Larry Thiel of Transwestern. They represented the seller, the California-based Ann Hurley Hodgdon Trust. Some 122,600 vehicles at I-70 and Kipling pass the center daily. Kipling, south of West 50th Avenue, draws 38,709 vehicles a day. “Independence Square is a rare, value-add opportunity situated along the Interstate 70 and Kipling corridor, which has seen significant redevelopment over the past 10 years,” Thiel said. Such value-add properties are in high demand among investors, Johnson said. “They are out there,” he said. But you can’t assume they are all good investments. “We really have to analyze them on an individual basis, before we will advise our clients to buy them,” Johnson said. “Sometimes the risk is just too great. “The reward justifies the risk in this case, if you believe you can lease up the remaining space, which we believe we can,” said Johnson. The two-building center was built on a 4.67-acre site at the southeast corner of West 50th Avenue and Kipling Street in 1984. It was renovated in 2008. It is shadow-anchored by a recently opened Natural Grocers and a SuperTarget. Tenants include a 5,874-sf VKGG, a restaurant, a 3,700-sf Luke’s Steak House, a 2,592-sf Kickin Wings, a 2,479-sf Creative Arts Design, a 2,456-sf Clear Creek Animal Hospital, a 2,447- sf Real Thai, a 2,386-sf Colorado Pain Relief center, a 1,615-sf D&K Jewelers, a 1,343-sf Curves and a 1,220-sf Subway. Independence Square also is within walking distance of a new RTD Gold Line station that will soon open. “As the Denver metro area continues to grow, infill shopping centers such as Independence Square will continue to generate significant investor interest,” said Transwestern's Cohen.