Conscience Bay Co. made a value-add play in the Denver market with the $14.51 million acquisition of a soon-to-be-vacated industrial building in Majestic Commercenter.
Boulder-based Conscience Bay bought the 277,236-square-foot building at 20101 E. 36th Drive in Aurora from S&Z Realty LLLP for $52.34 per sf, well below replacement cost. The U.S. Postal Service and Buehler Moving & Storage Co. each occupies about half the building, and their leases expire April 30. Buehler, owned by S&Z’s Stuart Smith, is moving to a bigger building. (See related story.) The Postal Service plans to consolidate into another facility, according to Conscience Bay Director of Commercial Investments Ben Woolf.
“We liked that it had both some in-place income when we bought it, to build up a little bit of a cash reserve, and then we’ll have a lease-up opportunity where we can hopefully capture some higher market lease rates,” said Woolf, noting existing rents are somewhat below market.
“At the same time, we’re going to pursue what we consider the Conscience Bay Co. value-add approach, which is addressing the older electrical systems, lighting systems, HVAC systems, irrigation systems and putting in place some higher-efficiency systems … to reduce the resource consumption at the property,” he said. Installation of a solar system also will be evaluated.
“We were able to acquire the building at a basis that we think is pretty significantly below replacement cost. We can make our investment in the building and retenant the building at market lease rates that I think at the end of the day will still be below replacement cost,” Woolf added.
Built in 1982, the building sits on 18.88 acres with a large fenced yard, 342 parking spaces and rail service, which Tyler Smith of Cushman & Wakefield noted is not easy to find in the Denver marketplace. Although it currently houses two tenants, it has the flexibility to accommodate three or four tenants, Smith noted.
The building also is within a master-planned park that is home to many Fortune 500 companies and has performed well historically through market cycles, he added.
“Majestic Realty does a really nice job of maintaining the park, and management of the park is strong,” Woolf concurred. “It has great access to I-70, and it has close proximity to the airport.”
Cushman & Wakefield’s R.C. Myles, who handled the transaction with Smith, and Cushman & Wakefield brokers James Brady, Alec Rhodes and Aaron Valdez, said there was strong investor appetite for the property.
“I think it’s a testament to Denver industrial opportunities that we had a broad-ranging interest. We had high-net-worth syndication groups, we had institutional buyers that made offers, so we were really pleased with the interest. Everyone’s pricing came in pretty close to what we were asking, and at the end of the day we picked what we thought was the best buyer who could perform quickly and do what they said they were going to do, and that was Conscience Bay. They were great buyers, and the seller was very pleased.”
Woolf said the Cushman & Wakefield team was instrumental in bringing the opportunity to Conscience Bay and getting it across the finish line.
Conscience Bay Co. is a Boulder-based company that owns a number of commercial properties in that market, as well as the Colorado Trade Center in Denver. The company plans to continue to invest in commercial (as well as agricultural) real estate, and with opportunities becoming increasingly difficult to find in Boulder, “I forsee a lot of that being in the Denver metro area,” Woolf commented.