Denver case studies

Denver Case Studies

Creating and Sustaining a Presence for Nearly a decade in the Denver Market Lincoln Property Company Commercial 2000 South Colorado Boulevard | Tower I - Suite 3700 Denver, Colorado 80222 Tel: (303) 893-1886 | Fax: (303) 893-4055 | www.lpcdenver.com

Colorado Center •

Project

•

Client

ASB Capital Management

•

Purchase Date

January 2006

•

Size

625,000 SF on 12 Acre Parcel

•

Planned Development

2000 South Colorado Boulevard, Denver CO

300,000 SF Office 60,000 SF Retail 200 Room Hotel 185 Unit Apartment Building

Overview • 1 million SF of entitled mixed use space (office, retail, multi- family residential, hotel, and parking structures) • Fully approved plans and are shovel ready • Located near I-25 and CO Blvd intersection and directly across from light rail station Investment Strategy • LPC to manage, market and lease entire property • Capitalize on location and TOD attributes of project • Maintain market rents and high occupancy levels to position asset for future development • Establish presence in Denver market and reputation communicating Colorado Center is a premier Class A office building and prime location for corporate HQ • Aggressively compete to be a leader in building sustainability Results • 65% leased to 96% in 18 months and grew rents by 30% during that time period • Renewed two floor Tenant through 2019 and completed numerous large block transactions • Received Energy Star ratings throughout property consistently since 2008 • Awarded LEED Gold certification at Tower II in 2010

Chaparral Business Park •

Project

•

Client

•

Dry Creek Corporate Center II and III

7257-7337 South Revere Parkway, Centennial CO

•

Project

10700 & 10800 East Geddes Avenue Englewood CO

Colony Realty Partners

•

Client

Colony Realty Advisors

Purchase Date 2007

•

Purchase Date

2007

•

Size 146,175 SF; 9 Separate Buildings

•

Size

185,958 SF; 2 Separate Buildings

•

Development Cost

$12.75 million $87.00 SF

•

Development $28 million Cost $150.00 SF

•

Sale Price

N/A

•

Sale Price

N/A

Overview • Assisted in sourcing acquisition opportunities • Assisted with underwriting efforts • Completed and present due diligence information to client

Overview • Assisted in sourcing acquisition opportunities • Assisted with underwriting efforts • Completed and present due diligence information to client

Investment Strategy • Strategically prospect long term quality tenants • Reposition property using value add strategy and implementing long term capital improvements

Investment Strategy • Establish DCCC II & III as a leader in sustainability • •

Results • Successfully maintain occupancy levels upward of 92% • Exceeded lease rate and occupancy expectations through an economic down turn • Completed numerous capital improvements in 2010: new directory, monument and tenant signage,, landscaping,

Implement hands-on property management approach Strategically prospect long term quality tenants

Results • Awarded LEED Gold status for DCCC II & III in 2010.

• Implemented the Property Logic work order system for Tenant use • On-site property engineer to respond immediately to Tenants.

Aurora Corporate Plaza •

Project

12100-12250 East Iliff Avenue, Aurora CO

•

Client

State of Illinois Teacher’s Pension Fund

•

Purchase Date

August 2002

•

Size

335,000 SF; 5 Separate Buildings

•

Development Cost $21 million / $63.00 SF

•

Sale Price

$28.47 million / $85.00 SF

Overview • Opportunistic acquisition with extensive near-term rollover.

• Class B+ office building acquired at approximately 50% of replacement.

• Sound structural construction with large, effective floor plates.

• Potential rollover of 275,000 SF during the first 24 months of ownership • Sub-market vacancy of 20% at time of purchase Investment Strategy • Reposition asset through improved management, leasing and facility maintenance • Negotiate “blend and extend” renewals with all tenants that have termination rights or upcoming lease expirations.

• Implement Property Logic - Automated Property Management software to improve tenant interaction and service Results • Leased 100,000 SF in 12 months • Reduced operating expenses by 12% within 12 months • Eliminated 5 of 6 termination rights • Exit strategy 18 months ahead of schedule • Successfully implemented Property Logic • Drastically improved tenant / landlord relationships • Exceeded proforma returns

Inverness Business Park Speculative Development •

Project

365,367 & 369 Inverness Parkway, Englewood CO

•

Client

Invesco Realty Advisors

•

Purchase Date

March 2002

•

Size

116,400 SF; 3 Separate Buildings

•

Development Cost $9.31 million / $80.00 SF

•

Sale Price

N/A

Overview • Opportunistic development due to high submarket vacancy • Developed three (3) Class A single-story office buildings • Zero (0%) loss-factor with large, efficient floor plates.

• Sub-market Vacancy of 20% at time of completion Investment Strategy • Fill project with new tenants within 24 months of completion.

Results • Leased 112,000 SF in 24 months - 96% occupancy • Closest competitor - 15% occupied over same period • Coordinated large TI construction projects for new Tenants

Lincoln Distribution Center Repositioning / Redevelopment •

Project

445 West 53rd, Denver CO

•

Client Pension

State of Oregon Teachers

•

Purchase Date

August 2002

•

Size

201,500 SF including 4+/- additional acres of land

•

Development Cost $4.1 million / $20.00 SF

•

Sale Price

$50.00 SF

Overview • Previously the Montgomery Ward’s distribution Center • Purchased the vacant property out of bankruptcy • Opportunistic re-development with over $1.4 million needed for improvements • Central Denver sub-market was at 8% vacancy at time of purchase Investment Strategy • Implement 12-month renovation schedule • Lease project to 1-2 new tenants within 24 months of completion Results • Renovations completed within 10 months of purchase • Leased property to 100% within 18 months • Sold as part of a portfolio sale to Institutional investor • Achieved proforma returns for operator.

LPC Denver The LPC Denver team has achieved notable success since it’s reorganization in 2002. During this time, our focus on providing first-class service to both office and industrial clients has helped grow our 3rd party business to over 1 million square feet. This success can be attributed to a team of focused real estate professionals dedicated to providing superior, valueadded real estate services that are tailored to the specific goals, opportunities, needs and challenges of our clients.

Our areas of expertise include Leasing and Property Management where our attention is on creating and executing marketing programs, prospecting, negotiating and closing transactions quickly without losing sight of the details. Property Management is focused on developing and executing management plans, keeping operating expenses low while striving for tenant satisfaction. Construction Management is an integral part of this process considering the impact that tenant finish can have on an operating budget. Tenant Representation services include evaluating qualified alternatives and proposals, negotiating business terms, construction management and move-in. Our Acquisition Services include identifying assets for purchase and performing comprehensive property evaluations, financial analysis, due diligence assistance and equity participation when necessary.

“In all our efforts, we focus solely on creating value for our clients.”

With over 50 years of leasing experience and 10 decades of combined property management experience, we understand the impact quality leasing and management has on the future value of your property. Each member of the Denver team has extensive experience in closing real estate transactions with over 1,000,000 million rsf leased in 50 different transactions within the past five years.

The Denver team is well supported by the national resources of Lincoln Property Company. The firm has proprietary systems and personnel support in such crucial areas as Accounting, Financial Analysis, Development and Construction Management.

Our team maintains positive and productive relationships with the top brokers, tenants and owners in the Denver area. This helps us to maintain current and accurate information on lease rates, market trends, building sales and space availability.

“The Denver team understands that our future growth will be based upon our client’s satisfaction.”

Lincoln Property Company Denver Leasing & Property Management Team Scott Caldwell, Senior Vice President Scott joined Lincoln Property in early 2001 as Senior Vice President. He is responsible for the overall management of the Denver operations. Those duties include new business development for property management and leasing services, 3rd party brokerage assignments, as well as office and industrial property acquisitions. Before joining Lincoln Property Company, Scott spent 8 years as a broker in the office services group of Grubb & Ellis in the Denver, CO office. During that time he was responsible for leasing over 1.5 million rsf of office space on behalf of his clients. During his 12-year tenure in commercial real estate, Scott has experienced the development, property acquisition, property management, and brokerage perspectives of commercial real estate.

Mark Homlish, Vice President Mark joined Lincoln Property Company in early 2002 as Vice President. His duties include new business development, office leasing and tenant representation. Before joining Lincoln, Mark spent two years as General Manager for CMD Realty Investors and five years as a broker with Colliers Bennett & Kahnweiler, both in Denver. During that time, he was responsible for office leasing in excess of 2.5 million rsf in five different sub-markets throughout the Denver metro area. Since entering the commercial real estate industry in 1994, Mark has been involved with the development, property acquisition, landlord and tenant representation perspectives of commercial real estate.

Erin Marilley, Marketing Manager Erin joined Lincoln Property Company in April 2010. As the Marketing Coordinator, Erin is responsible for marketing efforts on all properties in the LPC Denver portfolio.

In addition to managing listing information, Erin processes and tracks sale and leasing transactions for the Denver office. Prior to working with the LPC Denver group, Erin worked as an Assistant Development Manager on the Snowmass Base Village project. While working on the Base Village project, Erin was responsible for obtaining approvals for PUD amendments, owners rep for 80,000 +/- SF of mixed use space during design, project managed two sales centers totalling 6,000 SF with a total budget over $5 million. She comes to us with a BS in Business emphasizing in Operations Management and Real Estate from the University of Colorado at Boulder.

Tamara Varney, Tenant Services Coordinator Tamara joined the Lincoln Property team in the summer of 2011 as our Tenant Coordinator. She has worked in depth with Wells Fargo Bank N.A. for the past six years. She has organized numerous events for Wells Fargo as well as managed a successful team with in the company. Tamara has received several rewards and acknowledgments around her service and participated in the Aurora district customer service project for Wells Fargo Bank.

Lincoln

Property Company

Scope of Services • Leasing Services • Property Management • Construction Management Services • LEED Consulting • Development Services • Advisory Services • Corporate Services • Receivership Services

Lincoln Property Company

The

Citadel

3200 Cherry Creek Drive South Leasing & Marketing Listing Recommendations Exclusive Listing Period: Twelve (12) months Asking Lease Rate: $28.50-$30.50/rsf Lease Rate Escalations: $0.50/rsf per year

Tenant Improvements: Turn-key based upon credit and term Lease Term: 3-10 years Concessions: Free Gross Rent (outside the term)

Marketing Strategy E-mail announcing new leasing and management team CoStar / Xceligent / Loopnet Direct mailer to Tenants in the area

Floor plans mounted and displayed in all vacancies New brochure LPC leasing signage on premises Schedule introductory meetings with all existing Tenants

Broker Event following the completion of spec suites

Tenant Appreciation Initiatives (Event Tickets, Gift Cards, Gift Baskets, etc) Keys to Success New building identity Tenant retention Entertain all possible deals

Identify the “Right Deals” - Don’t Let Them Get Away!

Proactive / Creative / Responsive

Streamline leasing process starting with the showing thru occupancy

The

Citadel

3200 Cherry Creek Drive South Tenant Experience Lincoln Property Company develops a customized leasing strategy for each asset. Our primary goal is to pro-actively maintain and increase occupancy, and to create the opportunity for the property to continuously increase value.

Existing Tenants: Schedule introductory meetings with each Tenant to understand current

space needs, discuss possible future space needs and ensure they are being accommodated at the Citadel.

Future Tenants: Implement a focused and systematic prospecting approach to identify potential tenants.

Research the Tenant to confirm they are an established, credit worthy

company, and fully understand the requirement to assess whether

or not the Citadel would be a good fit.

Touring: Personally meet the broker and prospect on site with a complete tour package.

Tour Package to include: property brochure, floor plans, market information, and general area information.

Visit each appropriate vacancy and discuss the recent improvements

(paint/carpet), upgrades for spec suites, the poster size floor plan, possible space plan changes, etc.

Denver - Upcoming Expirations Within 18 Mos No. of Tenants Total SF Highlight key reasons for tenant retention:

3,000 SF - 5,000 SF 157 602,045 • Comfort with Ownership and Leasing Representatives 5,001 SF - 10,000 SF 115 768,176 • Class AA 10,001 SF - 15,000 SF 45 548,823 • New Spec Suites • Streamlined Leasing Process easy for the Tenant • Local Property Management • On-site Building Engineer

The

Citadel

3200 Cherry Creek Drive South Broker Experience Lincoln Property Company recognizes the importance of Broker relationships. To effectively target tenants we identify active brokers in the submarket and launch a direct marketing campaign.

Electronically Inform:

Create blast e-mail correspondence: • Announcing new management and leasing assignment • New brochure and corresponding vacancy floor plans • Broker Incentive(s)

Broker Event / Gathering: Host a broker event for a select group of individuals to promote the property Incentivise:

Visa gift card for every qualified showing

Commission bonus for specific criteria

Broker Relations: Timely response during marketing and leasing processes Aggressive ‘deal making’

Streamlining legal process during lease negotiations

Ensure commissions and fees are paid quickly Brokerage Leasing Fees:

Deal Type

Direct

CoOp

New Lease

$1.00 SF/Yr

Outside $1.00 SF/Yr LPC $0.50 SF/Yr

Renewal

$0.50 SF/Yr

Outside $1.00 SF/Yr LPC $0.25 SF/Yr

The

Citadel

3200 Cherry Creek Drive South Suggested Property Improvements

“Ready-to-go-Suites” Mounted suite display Brochures, floor plans, logo water bottles

General Suggestions for Reinforcing Class AA Standards:

• Garage Valet • 24/7 information hotline • Concierge

Consistent Marketing Remove KBS logo

Dry Cleaner

Restaurants

Limo / Taxi / Transportation

Event Tickets

Etc.

• Connect with Cherry Creek North Mobile Concierge Fresh Landscaping Common area “picnic” pods.

Outside seating / Umbrellas Signage to Mask Concrete

• Evaluate elevator operation • Mask concrete garage vent, possibly with signage

Reserved Parking for Prospective Tenants Valet Service Evaluate Garage Operations *Photos taken by LPC on 12/4/2012

The

Citadel

3200 Cherry Creek Drive South Vacancy Study & Lease up Submarket Midtown Colorado Blvd /Cherry Creek CBD

RBA 1,046,496 3,306,352 16,883,714

SF Available 89,088 486,237 2,286,758

Vacancy 9% 15% 15%

Average Lease Rate $/SF $21.57 $21.00 $28.89

3,000 SF - 5,000 SF 32 Properties 131 Spaces Average Lease Rate $26.64 SF

35 Properties

5,000 SF - 10,000 SF 115 Spaces Average Lease Rate $28.43 SF

29 Properties

10,000 SF - 15,000 SF 81 Spaces Average Lease Rate $28.66 SF

Citadel Lease Up Suite Size 220 1,558 280 3,296 400 3,496 720 2,226 225 1,446 370 5,779 620 2,120 Total 19,921

Lease Date Oct-12 Nov-12 May-13 Sep-12 Sep-13 Nov-13 Aug-13 15%

Rate $27.50 $27.50 $27.50 $27.75 $29.96 $29.96 $29.96

TI $0.00 $10.00 $40.00 $18.00 $30.00 $30.00 $30.00

Abatement 2 Months 3 Months 3 Months 2 Months 2 Months 2 Months 2 Months

The

Citadel

3200 Cherry Creek Drive South Competitive Set Class

RBA SF

YOC

Vacant SF

% Leased

Asking Rate

Operating Expenses

First Avenue Plaza 44 Cook Street

A

124,174

1984 Renn 2010

39,849

68.3%

$27.00

$12.28

First Avenue Plaza 55 Madison Street

A

137,716

19,422

87.2%

$27.00

$12.35

American National Bank Bldg 3033 E 1st Avenue

B

162,117

1982

40,268

87.1%

$31.00

$13.00

Fillmore Place 100 Fillmore Street

A

87,993

1982

15,029

91.1%

Withheld

$10.50

201 Columbine Street 2401 E 2nd Avenue

B

50,966

1999

0

100%

US Bank 210 University Blvd

B

129,649

1979

8,593

99.1%

$29.00

$13.62

101 University Blvd

B

59,997

49,067

18.2%

Withheld

$9.74 (Tax Undisclosed)

10,830

59.9%

$55.00 / NNN

TBD

Building Name & Address

1982 Renn 2010

1970 Renn 2012 Coors Foundation HQ 2nd Avenue & St. Paul

B

27,000 (Proposed)

2013

Lincoln Property Company Denver 2012

Denver Ranks Nationally

LPC Denver - Overview Portfolio Size:

Number of Properties:

Services:

Staff:

Source: ULI - Emerging Trends in Real Estate 2012

2,322,369 SF Office 958,406 SF Industrial/ Flex 135,933 SF Retail 3,416,708 SF Total 22 Office 12 Industrial /Flex 2 Retail • Leasing Services • Property Management • Construction Management Services • Development Services • Investment Services • Corporate Services • Receivership Services 17 Team Members

Investment Prospects for Commercial/ Ranked Number 11 out of 51 Multifamily Properties City Walkability Score 60.4 Washington D.C. Ranks No. 1 with score of 73.1

Denver Leading Industries 6%

5%

Manufacturing Trade, Transportation, and Utilties

15%

20%

Information Financial Activities

4%

Professional and Business Solutions 3%

Education and Health Services

10%

Leisure and Hospitality

7%

12%

Institutional Owner Relationships - Denver Metro Area ASB Capital Management

Other Services Government Mining, Lodging and Construction

18%

Denver Office Market

Colony Realty Partners

Stats YTD - 12/10/2012

Invesco Lincoln Realty Advisors Phoenix Property Company

Sub Market

Wells Real Estate Fund

Total Inventory SF

Total Vacancy SF

CBD NW

25,227,941 9,265,608

3,516,896 1,039,749

14.0% 11.0%

(486,115) 100,556

$28.95 $23.90

SES

20,285,987

2,309,277

11.0%

286,013

$22.83

Denver Market

185,663,692

22,416,303

12%

2,135,078

$26.06

2011 - 2012 LPC Notable Transactions Willis Insurance - New Lease Colorado Center

51,000 RSF

PCL Construction - Early Lease Renewal Colorado Center

45,000 RSF

8420 Rosemary - Key Bank OREA Sale

$750 K

700 12th Street, Golden - Sale

$1.2 Million

Total LPC Trasactions 2010 - 2012 YTD Year

Denver’s Commitment to Growth Project

Estimated Cost (Millions)

Denver International Airport / Stapleton Infill Project

$4.8 Billion

I-25 Expansion / Light Rail / Fast Tracks Union Station to DIA Light Rail (2016 Completion) Denver Convention Center (Expansion)

$1.8 Billion

Sports Authority Field - Denver Broncos

$365

$1.1 Billion

Class A Rate $/SF

Denver CBD Office Market - Breakdown Among Classes

Submarket

$340

Total SF

2010

Number of Transactions (LL Rep and T Rep) 38

249,839 SF

Pepsi Center - Denver Nuggets & Colorado Avalanche $160

2011

64

649,874 SF

Platte Valley Redevelopment

In Progress

2012 YTD

65

642,996 SF

LoDo/ Platte Valley Downtown Midtown

Union Station Redevelopment

In Progress

Uptown

Scott Caldwell • Senior Vice President • scaldwell@lpc.com Mark Homlish • Vice President • mhomlish@lpc.com Lincoln Property Company • 2000 South Colorado Blvd • Tower I - Suite 3700 • Denver CO 80222 • 303.893.1886 • www.lpcdenver.com

Vacancy Total Net % Absorption SF

Class A (SF)

% of Total CBD

Class B (SF)

% of Total CBD

4,354,444

7%

4,139,013

9%

Class A & B Direct Vacancy (%) 9%

5,506,961 6,285,157

18% 20%

3,382,562 2,172,672

11% 7%

12.9% 11.4%

6,853,350

22%

1,934,727

6%

12.3%