Retail property sales outpace all others in 2011
Overall, there were roughly 120 sales transactions in the first three quarters of ’11, compared to 112 for the same period the previous year, according to a third-quarter report by Sperry Van Ness/The Group Commercial.
Total dollar volume, though, was down for the same periods – to roughly $135 million in ’11 from nearly $150 million in ’10 – because there were more properties on the market than buyers, which meant deals closing at below asking prices.
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In the biggest shift from 2010, sales of retail properties by dollar value in 2011 outpaced those of office buildings most of the year, with roughly $48 million in sales through the third quarter compared to $44.5 million in the previous year.
In some ways, that’s not quite so surprising. Retail propertly sales by number of deals have been roughly double those of office and industrial properties for the last few years, and the market isn’t exactly home to many trophy high-rise office buildings.
Because supply remains high, buyers have been selective.
“Investment deals have been mostly for single-tenant retail properties, with investment-grade credit and long-term leases,´ said Mike Eyer, senior advisor and investment broker at SVN in Fort Collins.
Sales of retail properties increased to 19 transactions in the third quarter of ’11, from 15 for the prior-year period, according to SVN. By comparison, there were about eight sales each of office and industrial properties in that quarter.
Significant third-quarter retail deals included the sale of the 12,000-square-foot Harmony Village in Fort Collins for $3.8 million.
One of the region’s major recent office deals was Greeley-based Big Beaver Properties LLC’s sale in early December of the 30,000-square-foot, Class A office building at 6125 Sky Pond Drive in Loveland to Gravical Real Estate Holdings LLC of Golden for $8.3 million. Major tenants include the Kennedy and Coe LLC accounting firm and Morgan Stanley Smith Barney.
Northern Colorado apartment properties were another bright spot for investors, according to brokers, largely because there’s been no significant new apartment construction in recent years. That trend has driven up values of existing properties. One of the biggest 2011 sales in the region was the $30.5 million acquisition in April of the 229-unit Settlers’ Creek apartments in southeastern Fort Collins by TMP Settlers’ Creek LLC, part the Transwestern real estate company of Chicago, according to Larimer County property records.
Apartment developers bought land for new projects, as well.
Elsewhere, distressed commercial properties such as foreclosures continued to attract investors in ’11, but there weren’t many good options.
“There are not a lot of quality distressed properties on the market here, and there weren’t a lot to start with,´ said Kevin Brinkman, president and investment broker at Brinkman Partners in Fort Collins, another major commercial real estate firm. “If you’re looking for distressed, Class A assets, you’re not going to find them.”
Real Capital Solutions of Louisville is a distressed-property investor that owns the 230,558-square-foot TriPointe Business Center office property in Evans just south of Greeley, and wants to buy more in the region as part of a strategy to buy financially challenged properties it can improve, according to Chairman and CEO Marcel Arsenault.
The company likes Northern Colorado because of its high-quality real estate and good qualify of life, including proximity to higher education institutions such as Colorado State University and the University of Northern Colorado. The TriPointe building, for example, is a former State Farm Insurance regional headquarters and offers a prime location at U.S. Highways 84 and 85 plus amenities such as a cafeteria and 800 surface parking spaces.
“We’re anxious to build a book of business in Northern Colorado,” Arsenault said. “We’re looking at a few deals there. … But we haven’t seen much available from banks that we can buy.”
Among Northern Colorado’s largest distressed property dispositions of 2011 was the September sale of three Fort Collins hotels – the Marriott at 350 Horsetooth Road, the Residence Inn at 1127 Oakridge Drive and the Courtyard by Marriott at 1200 Oakridge – for $20.5 million. Private investor Southwest Value Partners of San Diego purchased the hotels from Integrated Capital LLC of Los Angeles, after the seller fell behind on payments for a $32 million note secured by the properties and the lender foreclosed.
Prices that area property sellers got in ’11 were affected partly by the fact that there were five property offerings for every buyer, according to the SVN report. Because of the imbalance of buyers to sellers, it was typical to see a 10 percent difference between asking price and final selling price by the third quarter.
The imbalance also accounts for the increased time a property stayed on the market. As of the third quarter of ’11, the median time to sell a property was 325 days, up from 180 days at the end of 2008, according to SVN.
Still, investors are expected to continue to have an appetite for well-leased Northern Colorado commercial properties with solid cash-flow yields, according to brokers. Strongest demand is for single-tenant properties occupied by financially strong tenants.
“There’s still money out there looking for good deals,” Eyer said.
Overall, there were roughly 120 sales transactions in the first three quarters of ’11, compared to 112 for the same period the previous year, according to a third-quarter report by Sperry Van Ness/The Group Commercial.
Total dollar volume, though, was down for the same periods – to roughly $135 million in ’11 from nearly $150 million in ’10 – because there were more properties on the market than…
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