USAA Real Estate paid $72.9 million, or about $423 per square foot, for a building and annex that house the FBI’s field office for Colorado and Wyoming.
The 144,143-sf main building, which sits on 9.9 acres at 8000 E. 36thAve. in Denver’s Stapleton neighborhood, was built for the agency in 2010. London-based 90 North Real Estate Partners bought it four years later, launching its North American operations, and had owned it ever since.
The four-story, Class A office building has extensive physical, power and information technology security measures, and can be expanded by 44,000 sf. The property also includes a 31,000-sf annex and 365 parking spaces.
The General Services Administration’s original lease extends through 2030. Due to the specialized nature of the LEED certified building, there’s a high probability of lease renewal.
“This asset has been a great investment for 90 North, and our partner Dimah Capital, and served as our entry into the U.S. real estate market,” said Daniel Cooper, 90 North head of North American Operations. “The continued growth of this sector of the Denver market along with the stability of the tenancy of the FBI have proved to be a great combination and will serve the new owners well for years to come.”
According to Cooper, the 90 North and Dimah Capital business plan at the time of acquisition contemplated holding the asset until July of this year. “Due to the timing required to sell real estate assets, we began the process in advance of the business plan end date,” he said.
The company focuses on buying “live, work, play” assets with long-term leases to single, investment-grade tenants in order to achieve solid returns above the bond market, in this case U.S. Treasurys, while also leveraging the solid financial credit of the tenant, he said.
Executive Vice Presidents Brian Saal and Marc Rampulla, who specialize in capital markets transactions for government occupied real estate, as well as Denver Capital Markets expert Patrick Deveraux, led the JLL team handling the sale. Keith Largay, Brian Walsh and Baxter Fain led the JLL team handling the acquisition financing.
“Given the deal quality and profile, we were able to attract a deep pool of interest from a mix of private and institutional investors. The lack of comparable investment opportunities available in the market enabled us to achieve a high level of competition for our client,” said Rampulla, co-leader of JLL’s government capital markets team.
The building’s construction in 2010 helped to mark the area’s transformation from a primarily industrial marketplace to a vibrant, mixed-use area.
“There doesn’t exist a lot of office product that is currently serving the Stapleton area, but the existing product in that area is fully occupied,” said Devereaux. Because there aren’t a lot of existing assets available to investors, “Capital hasn’t become aware of the live, work, play environment that exists there and how appealing Stapleton is to millennials as they transition out of living downtown to needing to have more of a household for the establishment and growth of their families going forward,” he commented.
One of the largest urban infill developments in the country, Stapleton has 26,000 residents and at build-out will have 12,000 homes, more than 1 million sf of office and close to 4 million sf of retail.
The FBI property is approximately one-quarter mile from the Interstate 70/I-270 interchange, and two blocks from an East Rail Line station. The location suits the government’s security requirements as well as its need for highway access both to the central business district and Denver International Airport.
“The FBI Denver building is one of the best located and highest-quality mission-critical buildings in the country,” said Saal, co-leader of JLL’s specialty government sales platform.
Throughout the holding period, 90 North provided asset management services. Newmark Knight Frank handled day-to-day management of the property.
An independent investment advisory firm,90 North specializes in socially responsible real estate investment, with considerable experience working with Shariah compliant equity partners. It has a U.S. office in downtown Chicago, an office in Sydney, Australia, and a representative office in Kuala Lumpur, Malaysia.
The FBI property was 90 North’s only Denver asset. “However,” Cooper said, “We love the Denver market and continue to actively seek assets which meet our investment criteria.” In addition to single-tenant, net-leased assets, the company has residential and industrial platforms.