Early next week, we will find out if one of our investment partners will be awarded the acquisition of two distressed office buildings in the Colorado Boulevard submarket of Denver, just south of Cherry Creek.
The transaction is a short sale below the existing loan balance held by a major US bank who must get it off their books by mid-December, which created a distressed sales process that precluded many institutional investment groups from participating.
My partners and I own another office investment nearby and understand the submarket's leasing dynamics very well, which enables us to move quickly. It is now between us and one other investment group going through the qualified bid process. Most institutional buyers are still one the sidelines, however, we are expecting contrarian and opportunistic capital to enter the office buyer pool in 2025 resulting in more competitive bidding processes.
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Office product type has suffered post-pandemic as employees became comfortable working from home in a remote setting. However, just this week, Starbucks and Amazon required all of their corporate employees back in the office 3-5 days per week while JLL has said the office market has reached its bottom.
Office demand may never surpass what it was before the pandemic, but companies know the cultural benefits of in-person meetings that lead to higher productivity and collaboration. There is a flight to quality happening in office buildings and new ownership groups with a reset cost basis are absorbing space at a much higher pace than commodity products.
The cost basis on this asset is among the most attractive I have seen in the last three years and if awarded, I am planning on making a significant personal investment into this deal. There is a combination of attractive current yield with a below market cost basis, and the sponsorship is well seasoned to execute on a value add business plan.
If such a distressed asset is something of interest to you and you want to be among the first to be alerted about this opportunity, just reply to this email and let me know.
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