DENVER | Main Development Thread #7

[TakeFive]

Good Lord, I didn't even know they were defining cap rate changes in basis points. That's what I call data overload. With bonds you're at least assured a precise rate of return - except that based on holding the bond til maturity. Otherwise they can't tell you what the value of your bond will be two weeks from Tuesday.

The best investment advice is simple: The trend is your friend... until the trend does a U-turn and then it's no longer your friend.

[laniroj]

Originally Posted by Robert.hampton

Go on loopnet and find me a single investment property going for under 5% cap rate in Denver. Most properties at the 5% range are newly renovated -- older properties tend to get you in the 7-8% range. And that's in Denver's current 'hot' market. You used to be able to get in the 10% range no problem.

You're welcome for introducing you to the world of real estate investing. I guess these office tower investors you know must be a bunch of noobs.

Loopnet?! Haha..sub 5 cap rate deals don't go on loopnet. That said, lots of small 1031 deals happen sub 5 for small properties, ground leases with fast food chains routinely trade around 5 or below, NNN single tenant structures trade around there too. My company just did a 1031 at a 2 cap because a 2 is better than paying the man. However, for large scale property, sub 5 is laughable. The closest large scale property we have in Denver is probably the triangle building and the two DUS wing buildings and they didn't break 5 even at $700+ PSF.

[561GC]

Anyone know the status of Amacon's Block 176 condo project? The groundbreaking date kept getting pushed and now looks like it's been pulled from their website.

[The Dirt]

It hasn't been pulled from their website. Just scroll to the bottom and look at the rightmost entry: http://amacon.com/portfolio/

[561GC]

Originally Posted by The Dirt

It hasn't been pulled from their website. Just scroll to the bottom and look at the rightmost entry: http://amacon.com/portfolio/

Ah, see it now. Was clicking "Colorado" and nothing came up. Is Shelby's still standing or has it been razed?

[Robert.hampton]

Originally Posted by laniroj

Loopnet?! Haha..sub 5 cap rate deals don't go on loopnet. That said, lots of small 1031 deals happen sub 5 for small properties, ground leases with fast food chains routinely trade around 5 or below, NNN single tenant structures trade around there too. My company just did a 1031 at a 2 cap because a 2 is better than paying the man. However, for large scale property, sub 5 is laughable. The closest large scale property we have in Denver is probably the triangle building and the two DUS wing buildings and they didn't break 5 even at $700+ PSF.

Sounds like your company is doing really awful business -- look at the report posted above: you should be getting close to 5% on the most lucrative and stable properties in Denver.

You can get fixed income in the 2% range -- why on earth you would take on all the risk and work of a real estate investment for such negligible return is quite befuddling, unless you are simply looking to extend your leverage without much for returns.

[UrbanT]

The lot for the new world trade center is currently being cleared with fencing getting installed! Also, there is a new red crane base at 3770 Walnut st. so that project is in full swing.

[SirLucasTheGreat]

Originally Posted by UrbanT

The lot for the new world trade center is currently being cleared with fencing getting installed! Also, there is a new red crane base at 3770 Walnut st. so that project is in full swing.

Wait are you serious? If so, we should all take a celebratory shot.

[Jmc84]

Originally Posted by SirLucasTheGreat

Wait are you serious? If so, we should all take a celebratory shot.

As someone that lives nearby in Whittier/Skyland, I've been waiting for that project to break ground for years.

[RyanD]

Originally Posted by The Dirt

It hasn't been pulled from their website. Just scroll to the bottom and look at the rightmost entry: http://amacon.com/portfolio/

They just filed a Transportation Plan late November. It's still moving through, slowly but surely.

[Denver Dweller]

https://businessden.com/2019/12/12/o...d50a-147998669

[jhwk]

Originally Posted by Denver Dweller

https://businessden.com/2019/12/12/o...d50a-147998669

The development plans call for 186 apartments on the upper floors and 53 parking spaces.

Very nice.

[TakeFive]

I'm getting a new name


Image courtesy Equity Commonwealth

Salesforce plans to brand Denver tower, double Colorado workforce
Dec 12, 2019 By Jensen Werley – Reporter, Denver Business Journal

The company plans to move into the building at 1225 17th St. starting in late 2020, according to a blog post by Salesforce. It is leasing three floors and will add rooftop signage to the building. The company has about 250 employees in the Denver area, a Salesforce spokesperson told Denver Business Journal. Doubling its presence over eight years would bring its area headcount to approximately 500.

A $5,737,500 incentive package was approved for the company by the Colorado Economic Development Commission in April, officials confirmed to DBJ Thursday. At the time, the code name for the company was "Project Wildcat."

I'm not certain from the article that the building won't still be called 17th Street Plaza but it will get Salesforce signage on top either way.

[twister244]

Originally Posted by UrbanT

The lot for the new world trade center is currently being cleared with fencing getting installed! Also, there is a new red crane base at 3770 Walnut st. so that project is in full swing.

Pics or it didn't happen........

[TakeFive]

Denver among top U.S. markets for residential construction permits in 2019
Dec 12, 2019 By Jeff Jeffrey

Nothing much to see here but if you're curious how metro Denver compares to other cities - Denver came in 17th out of 20 - then click here.
Worth noting perhaps is that Austin/Round Rock pumped out 60% more permits than Denver.

[semiurban]

Originally Posted by TakeFive

I'm getting a new name


Salesforce plans to brand Denver tower, double Colorado workforce
Dec 12, 2019 By Jensen Werley – Reporter, Denver Business Journal

I'm not certain from the article that the building won't still be called 17th Street Plaza but it will get Salesforce signage on top either way.

A $5,737,500 incentive package for 250 jobs seems excessive.

[wong21fr]

Originally Posted by semiurban

A $5,737,500 incentive package for 250 jobs seems excessive.

It’s $21K per position. As these are probably north of $100K positions the incentive will be recouped in 6-7 years.

[TakeFive]

Originally Posted by semiurban

A $5,737,500 incentive package for 250 jobs seems excessive.

With intentions to double their workforce perhaps they figured they owed it to themselves to consider other locations outside of Denver... although they already have 14 other offices around the country so it's doubtful they'd move out of Denver.

Kind of interesting; their HQ in San Francisco is a 61-story tower built on spec by Hines. Hines won a competitive process with a design by starchitect César Pelli of Pelli Clarke Pelli Architects. Boston Properties bought 50% interest in 2012 and now owns 95% of the building with Hines retaining 5% ownership. Salesforce is leasing 714,000 Sq Ft.

I guess you can always hope that down the road they might choose to relocate some employees from San Francisco to Denver?

[laniroj]

Originally Posted by TakeFive

The biggest difference between Denver and Phoenix with respect to affordable homes is that Phoenix (still) has an endless supply of cheap land.

I'd be really interested to see what water costs are in Pheonix. I can't possibly imagine those fees are small and one would think that would inherently make sprawl (affordable at least) impossible down there. The cost to bring that kind of infrastructure just seems staggering. One of these days, I'm going to look into it. Colorado has become so hostile that we're looking at Arizona now. Desert mountains here I come!

[laniroj]

Originally Posted by Robert.hampton

Sounds like your company is doing really awful business -- look at the report posted above: you should be getting close to 5% on the most lucrative and stable properties in Denver.

You can get fixed income in the 2% range -- why on earth you would take on all the risk and work of a real estate investment for such negligible return is quite befuddling, unless you are simply looking to extend your leverage without much for returns.

There are lots of reasons to pursue a 2% return...like redevelopment potential, which a fixed income investment does not provide. Tax avoidance is a real motivation too - say you take $5mm in gain proceeds from the sale of a commercial bldg. Would you rather pay $1mm of that to the government, or reinvest it along with the other $4mm in a property that generates a 2% return? Most would rather roll it over (granted not at a 2% return) depending on the stage of life one's at, but if there is redevelopment potential, a 2% annual return could very well turn into a MUCH higher IRR over the course of the investment.

The point I'm trying to make is that there are LOTS of reasons that small properties trade sub 5, but real estate investors seeking a current return (the angle you seem to be looking at this from) do not generally pursue a sub 5 return (cap rate) and this includes pretty much all of the institutional world in Denver for large property transactions.