Location: Northwest corner of C470 at the Broadway and County Line Road intersection Date Acquired: October 2004; Sold December 2007 Investment Basis: $8.3 million ($106/sf) Rentable Square Feet: 78,794
This multi-tenant medical office property is located at a highly visible intersection in Highlands Ranch, a desirable, densely populated master planned community in the south Denver MSA. The property is immediately accessible to the interstate and 1 mile from Lutheran Hospital. The buildings were in fact owned by the hospital owners, Centura and Catholic Health, whose primary focus was the hospital not off-campus office buildings. As a result, the property suffered from deferred maintenance, operating inefficiencies and below market occupancy and rents that did not accurately reflect the property’s superb location or inherent appeal to the medical community.
The first priority was to stabilize the rent roll and prevent any further exodus by existing tenants. Promises made were delivered on by the new ownership. Deferred maintenance was immediately remedied, management was proactive and responsive, daily services were improved and a cosmetic capital improvement program was put in place. A bright, colorful sculpture was put in each skylit lobby atrium while common areas received fresh paint, framed artwork and new lighting. Sterile, somber doctor offices were suddenly transformed into a progressive, cheery medical facility. The property’s name was changed from just “Medical Center” to Highlands Ranch Healthcare Plaza and parapet signage was added. The existing and prospective tenant community immediately recognized the change in sponsorship and rents were increased by nearly 20% over what the prior owner had achieved. Additionally, operating expenses were reduced by over $1 per square foot. Despite downward pressure on sale prices as the capital markets began to erode, the property was sold three years from acquisition at a 75% increase over the original purchase price.