Pratt, Circle Capital ink $142 million deal

LONGMONT ? The new owners of approximately 2 million square feet of former Pratt Properties commercial real estate in Longmont say their objective is to raise occupancy levels in the buildings from the current 65 percent to 95 percent.

Local Realtors, meanwhile, said that with commercial vacancies still high throughout the Front Range and Denver metro area, it could take from three to seven years to achieve that goal.
Terry Fitzpatrick and R. Randall Clark, co-owners of Denver-based Circle Capital Partners LLC, purchased a majority of the Pratt real estate portfolio from owner Susan Pratt for $142 million or $71 per square foot on April 20. The deal includes buildings that house Maxtor Corp., Texas Instruments Inc., Array BioPharma Inc. and Front Range Community College.

Dallas-based Invesco Real Estate, a division of Invesco, is an equity partner in the deal, Fitzpatrick said, but he declined to reveal the percentage of investment by each group.
Fitzpatrick said he would be working closely with Longmont Area Economic Council President John Cody to attract tenants.

?From this point forward, you could say that John Cody and I will be attached at the hip,? Fitzpatrick said.

Cody said he looks forward to working with Circle Capital.

?I think they have the financial resources to be flexible and aggressive with lease rates ?, and they have great contacts in the Denver metro area,? Cody said. ?Because it?s flex space, there?s any number of industries that would work well there.?

Fitzpatrick said Circle Capital will retain Denver-based CB Richard Ellis as a partner in marketing the properties. Pratt hired CB Richard Ellis in July 2004.

?Susan did an excellent job in researching for the best real estate team in the market, and we?re going to stay with them,? Fitzpatrick said.

The purchase of the 41 Pratt buildings becomes Circle Capital?s largest single portfolio in Colorado, Fitzpatrick said. The company employs eight people, some of whom will be opening an office in Longmont, he said. Circle Capital owns other properties across the United States, but Fitzpatrick declined to reveal how large of a portfolio the company has.

Pratt said she will continue to keep busy managing about 125,000 square feet of commercial space and about 150,000 square feet of hospitality space, including the Radisson Hotel and Conference Center, not included in the sale. Pratt reported 187 employees in 2004. She said she hasn?t discussed the future with those employees, yet.

Fitzpatrick said the details of getting the buildings up to 95 percent occupancy still are being worked out.

?Right now, we plan on just working with the landscaping a little bit and getting some new paint on the buildings,? he said. ?We want to freshen the buildings up a bit.? He said the recovering economy and strong tenants in the buildings will help to draw new tenants.

?We really see this as a national play,? Fitzpatrick said. ?People across the nation know about Longmont.? On a recent trip to Raleigh, N.C., Fitzpatrick said a business park owner had mentioned the Longmont area as a strong competitor in the industry tenant market.
New York-based Broad Street Advisors LLC and Morgan Stanley helped broker the deal.

High price
Local Realtors said the price tag of $142 million or $71 per square foot seemed a little high, but it may pay off for Circle Capital if its purchase comes at the actual bottoming out of the local real estate market.

?I was a little surprised by the price they received, considering the large size of the portfolio with that much vacancy,? said Jason Kruse with The Colorado Group. ?But I think it?s a good deal for both parties. If they plan to hold it for a while, then there?s there an upside with the potential of filling that vacant space.?

Kruse predicted it probably would take Circle Capital three to seven years to reach its goal of 95 percent occupancy. ?The success of the portfolio will depend on the market,? Kruse said. ?They are banking that we are coming off the down cycle of the market.?

Local real estate investor Marcel Arsenault said he made a bid on the Pratt portfolio, but he wasn?t willing to pay as high of a price as did Circle Capital.

?Our bid came nowhere near that ($142 million),? Arsenault said. ?The indication is that the buyers think that the market will recover quickly.? But Arsenault said he believes it will be about five years before Circle Capital can claim the buildings 95 percent occupied.

Becky Gamble, president of Boulder-based Dean Callan & Co., said the perceived high price speaks to the rare opportunity of such a purchase.

?You don?t normally see landlords selling their entire portfolio,? Gamble said. ?The price they paid shows how bullish investors are about this market.?

Before co-founding Circle Capital with Clark in 2000, Fitzpatrick was a co-founding partner of Denver-based Pacifica Holding Co. from 1991 to 2001. The company acquired, developed and managed more than 10 million square feet of office, industrial and retail assets in the Rocky Mountain region.

?After acquiring and stabilizing the portfolio, Pacifica ultimately sold the entire mixed-use portfolio at the peak of the market, in a bulk transaction to three separate industry-leading publicly traded real estate investment trusts,? a Circle Capital and Pratt press release said.
Fitzpatrick and Clark have been friends for about 25 years. Clark is chief executive officer of Circle Capital Group LLC, the holding company for Circle Capital Partners. Before launching the company, Clark was a founding partner and managing director of Cherokee Investment Partners LLC, a fiduciary manager for a series of discretionary private equity alternative investment funds, managing in excess of $1 billion of investor capital focused on the acquisition of environmentally impacted real estate assets.

Invesco Real Estate is a division of Invesco Inc., a wholly owned subsidiary of independent investment giant Amvescap PLC (NYSE: AVZ), which is based in London, England. Of the approximate $382 billion managed by Amvescap worldwide, Invesco manages approximately $19.6 billion in direct real estate assets and publicly traded real estate securities.

Susan Pratt took over management of Pratt Properties after her husband, Ken, died of cancer in 1995, and since then Pratt Property Management has been ranked as one of the largest women-owned businesses in Boulder County, listing revenues of $32 million in 2003.

Active in numerous community causes, she established the Susan M. Pratt Foundation and has served as the chairwoman of business catalyst CTEK Ventures Centers, donating office space and helping to establish the CTEK Longmont Venture Center.

Pratt Property Management?s roots go back nearly a century to when in 1912 Marion Edward Pratt opened his real estate business in Longmont.

His son Harold Pratt eventually took over the company and focused on residential developments including Longmont Estates. Harold Pratt?s son, Ken Pratt, took over the business in 1969 and shifted the company?s focus to commercial space. In 1980, Ken married Susan, and the couple ran the company together. Both Ken and Susan have been inducted into the Boulder County Business Hall of Fame.

In the 1980s, the company helped the city of Longmont develop an economic initiative with Japanese companies, helping to attract major employers such as Solbourne/Matsushita and Fujitsu/Intellistor. At one time, six Japanese-based high-tech companies had Longmont operations.

Contact David Clucas at (303) 440-4950 or e-mail [email protected].

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