LONE TREE, CO-In a play to expand its Denver portfolio, Buchanan Street Partners has entered into a joint venture with Lowe Enterprises to acquire Parkridge 4, a 192,800-square-foot, six-story, class-A office building here from Denver-based Miller Global Properties LLC for what industry sources say is $34 million. Built in 2001 and located at 10375 Park Meadows Dr., Parkridge is 93% leased by high-credit companies such as CNA Insurance, Merrill Lynch, UBS, Nestle, Ameriprise and the Department of Defense.
“Parkridge 4 is the highest-quality office building in the emerging submarket of Lone Tree and is especially attractive given the outstanding credit of its tenancy and the project’s limited near-term lease expirations,” said Tim Ballard, president of BSP, in a prepared statement. “The property’s strong rent roll, excellent location and physical quality allowed it be accretively financed, further enhancing Buchanan’s expected investment returns.”
The seller was represented in the sale by Mike Winn and Tim Richey of Cushman & Wakefield, while Buchanan Street and Lowe Enterprises represented themselves in the transaction.
Indianapolis-based 40/86 Mortgage Capital provided financing for the acquisition, which was arranged by John Stewart of Northmarq Capital in Denver. Nathan Johnson and Austin Kane of Newmark Grubb Knight Frank were hired to manage the property’s leasing.
Robert Dougherty, partner with of Buchanan Street Partners, tells GlobeSt.com that the firm is attracted to the long-term dynamics of the Denver market and “we feel like it’s emerging from a bit of a trough still. We’re particularly attracted to this micromarket of Lone Tree/Parkridge where there’s a lot of healthcare, residential and commercial development happening. The broader Southeast Denver market area is going to increase in value.”
Non-office development that’s occurring in the area includes a Kaiser Permanente hospital being constructed on Park Meadows Dr. and a large residential subdivision with single and multifamily housing called RidgeGate about a mile south of Parkridge 4, in addition to a hotel being planned for the area.
The added value Dougherty refers to is in part due to the extention of the light rail down to Lincoln Station and the previous completion of the E-470 toll road here, which opens up the whole metro area to the south. “We just felt like the access and visibility of this property were terrific,” Dougherty adds.
The property’s quality and tenant roster added value to the transaction for the new owner, he continues. “From a property perspective, Parkridge’s high-quality, relatively timeless construction delivers what tenants in that market want. We felt that the tenancy is extraordinary—you don’t find rent rolls that often that offer that outstanding tenant credit. The lease expirations of those tenants are not for a while so the property offers very reliable cash flow. Take those two things—relatively long-term leases from good-credit tenants—and that combination allowed us to get very attractive financing, enhancing our equity yields. We felt like it’s a very strong risk-adjusted return, at a very significant discount to replacement costs.”
Buchanan Street Partners has underwritten Parkridge 4 for a five-year hold, although it does have a 10-year loan, giving the buyer the ability to hold it longer. “We’re a value add investor,” Dougherty says. “If the market dictates an earlier exit, we would exit in 2-3 years just as soon as hold it. The financing we have could offer a nice asset to the next buyer, and that was part of our strategy.”
As GlobeSt.com previously reported exclusively, in July Buchanan Street Partners acquired a 75,000-square-foot, class-A building in HavenPark, a prestigious master-planned office campus in Rancho Cucamonga, CA. The firm purchased the institutional-grade property for $10.6 million, or $141 per square foot.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
