Broe Real Estate Group recently expanded its medical office building repositioning efforts with the $15.6 million acquisition of Dry Creek Medical Office Building.
Broe plans to invest $2 million-plus to reposition the 57,257-square-foot building, where it already has extended leases with two major tenants.
Dry Creek Medical Office Building is a multitenant building on 4.23 acres at 125 Inverness Drive East in Englewood, near Sky Ridge Medical Center, Centennial Medical Plaza, Medical Center of Aurora and Littleton Adventist Hospital. It was 80% occupied at the time of the sale.
“This acquisition is the latest example of our medical office building repositioning strategy,” said BREG CEO Doug Wells. “As a local operator, the BREG team is well-suited to address pending tenant roll and secure strong long-term occupancy.
“By investing significant capital in physical upgrades and leasing costs and executing a focused asset management program, we will ensure that our tenants can continue to deliver the needed medical services for Coloradans that live and work in south Denver’s rapidly growing region.”
Dry Creek Medical houses multiple medical groups, the largest of which are the Center for Women’s Health, Dry Creek Surgery Center, Touchstone Imaging and U.S. Oral Surgery Management. The three-story building was built in 2000, with most of the leases rolling over within the next three years, according to Wells.
“As a Denver-based company, our local team has been able to invest significant immediate attention toward tenant renewals, and our efforts have already resulted in two major tenant extensions that form a strong foundation for long-term property tenancy,” he said.
The amount of money that tenants have invested in their spaces and the building’s location near their various patient bases, offer “a very high likelihood of renewal for most of the tenants in the building,” said Chris Bodnar, vice chairman with CBRE Healthcare Capital Markets, who represented the seller with CBRE’s Lee Asher, Shane Seitz and Dann Burke.
Broe Real Estate plans to improve the tenant and patient experience with fresh landscaping, paint, and parking lot and roof repairs. Interior improvements will include HVAC and elevator cab upgrades.
According to Bodnar, there is very strong investor appetite for buildings such as Dry Creek MOB. “Market demand for nonhospital medical services is at an all-time high, and Colorado’s population growth continues to exceed the national growth rate. Dry Creek Medical Office Building is an institutional-quality asset within a highly established, high-growth market.”
In addition, “There is a limited amount of value-add-type product on the market both in Colorado and nationally. So, whenever we do have an opportunity that is a good-quality, well-located building that does have some upside potential through lease-up, the demand for those types of opportunities is typically pretty high,” Bodnar said.
Dry Creek Medial Office Building, sold by Deutsche Bank, is Broe Real Estate Group’s fourth major MOB repositioning program within the past 12 months, bringing the total to nearly 540,000 sf. Acquisitions included a three-building portfolio in Colorado Springs with more than 70,000 sf of medical tenants, as well as projects in Sacramento, California, and Rockville, Maryland. Colorado and the Western U.S. continue to be a priority markets for the company, said Wells.