A 93-year-old real estate company expanded its Denver metro holdings with two office properties in the southeast suburban submarket.
Melcor Developments Arizona Inc. bought the Offices at the Promenade and Office Plaza at Inverness in separate transactions totaling $26.45 million.
Offices at the Promenade is a 128,400-square-foot property at 7935 and 7995 E. Prentice Ave. in the Denver Tech Center. Felton Properties sold the two buildings for $16.85 million, or $131.23 per sf.
Office Plaza at Inverness sold for $9.6 million, or $102.89 per sf. It consists of 93,314 sf in three buildings at 6 Inverness Court East, and 8 and 10 Inverness Drive East in Inverness Business Park.
“We’re very bullish on the Denver market,” said Melcor Vice President Darin Rayburn, noting net migration, a young demographic and light rail lend to the region’s vibrancy.
Melcor owns 1,100 acres of residential land in Aurora and also owns the Centennial Airport Plaza office building. The acquisitions give it a presence in the southeast submarket’s two major office nodes, Rayburn said.
“The Denver Tech Center is a development that we covet,” he said, adding Inverness also offers a master-planned environment. “We understand the power of a good master-planned community,” he said.
Melcor Developments is affiliated with Edmonton, Alberta, Canada-based Melcor Developments Ltd., which was founded in 1923 and where Rayburn serves as executive vice president. Melcor also has a Canadian real estate investment trust, of which he is CEO.
‘We’re not capital markets people. We’re real estate people.’
The company does its U.S. business out of Scottsdale, Arizona, and is a long-term, hands-on owner. “We’re not capital markets people. We’re real estate people,” Rayburn said.
There likely will be improvements to the company’s newest Denver properties, but not before collecting feedback from tenants.
Melcor has a third Denver-area office property under contract that’s expected to close soon.
Both Offices at the Promenade, and 6, 8 and 10 Inverness offer upside for the new owner, according to brokers involved in the deals.
At Offices at the Promenade, “Market rents are about $23 a square foot, and the average rents in place are about $19.50, so there’s a considerable amount of upside potential in the in-place rents,” said Patrick Devereaux, who represented the seller with fellow JLL Executive Vice President Jason Schmidt.
The Greenwood Village property was 86 percent leased at closing. PepsiCo, the General Services Administration and Poms & Associates, an insurance brokerage firm, are the largest of nearly 30 tenants.
The buildings were built in 1975, and renovated in 2007 and 2014.
Devereaux said there was “tremendous investor activity” for the Offices at the Promenade, which he called a “tremendous piece of real estate.”
“I think we had close to eight offers to purchase the property. This is a best-of-class B property in the northern end of the Denver Tech Center,” he said. “It’s a small-tenant building with good risk diversification.”
The Belleview Promenade retail center, with Cool River Cafe, Starbucks, Bar Louie, Il Fornaio, and numerous other restaurants, retailers and service providers, is a three-minute walk out the front door.
The office buildings occupy 8.75 acres, which Devereaux said is one of the larger land parcels within the DTC. The south side of the property, between the two buildings, offers a parklike atmosphere.
Office Plaza at Inverness sits on 7½ acres along the Inverness Golf Course in Englewood and was 100 percent occupied at the time of the sale.
A small-tenant property with more than 40 tenants, the asset saw interest from a couple of investment companies and from private investors, particularly 1031 exchange buyers out of California.
“We saw a number of investors from California look at the deal,” said Rick Egitto of Inverness Properties, who represented the seller with Inverness Properties’ Jeremy Reeves and Bill Woodward. Tom Swan of Amcal Southwest represented Melcor.
Average rents are $16 per sf gross, and current market rents average $18.50 per sf, “So there’s a nice upside there for Melcor to take advantage of,” said Egitto.
A realignment of County Line Road will bring the road right up to the property, he said.
Luxury homebuilder Toll Brothers has its regional headquarters at 8 Inverness. Connections Academy, an online public school, also has space in the building. EthicsGame, an online ethics education provider, is a major tenant at 6 Inverness Court East.
The two-story buildings were constructed from 1978 to 1980.
Office Plaza at Inverness features floor-to-ceiling glass, an on-site café, a common conference room and 337 parking spaces.
