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Buildings selling like hot cakes in Denver

Investors push sales on another record pace in '07

John Rebchook, Rocky Mountain News

Published June 28, 2007 at midnight

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Investors are snapping up retail and industrial buildings in the Denver area at a record pace.

In the first six months of the year, investors paid $2.5 billion for commercial properties, which will likely break last year's record of $5 billion by year's end.

It's possible that sales volume could hit $6 billion this year, said Brad Neiman of Northstar Commercial Partners, who released the report with Dan Grooters of Grubb & Ellis.

"The question is, 'How high is up?' " Neiman said. "We have just shattered all of the previous records and boundaries."

This year's tally is 23.6 percent higher than the previous record of $2.04 billion in sales in the first half of 2006.

The biggest deal in Denver's history occurred earlier this year, when Chicago-based Callahan Capital Partners paid $770 million to the Blackstone Group for the former Equity Office Properties' downtown portfolio.

"That was basically three times the size of the next biggest deal," Neiman said.

That transaction was handled by the CB Richard Ellis Real Estate team of Mary Sullivan, Tim Swan and Ron Urgitus. The team also sold the Janus building in Cherry Creek for $65 million, which set a record price per square foot of almost $400, Nei-man pointed out.

The second largest deal took place this month when LBA Realty paid about $200 million for the two-building Denver Place office center.

Mike Winn, who handled that transaction with fellow Cushman & Wakefield broker Tim Richey, said there were a number of serious bidders competing against LBA.

LBA liked Denver Place for its location, quality and energy efficiency, Winn said.

They also liked the fact that the city's first Ritz-Carlton is being built across the street.

"They saw that as a very positive factor, with the way office lease rates and demand for space are rising downtown," Winn said.

Investors are "willing to pay today for future rent growth," Nei-man said. "It has led to prices that are just stunning."

Neiman said investment interest is occurring not only in Denver, but also across the country.

"The real estate market used to be countercyclical to the stock market because it was considered an alternative investment," Neiman said.

"Now, the stock market is reaching virtual highs, and so is real estate.

"What has happened is that real estate prices have been driven up so much in first-tier cities on either coast that investors are increasingly looking to Denver as a less expensive alternative."

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