Posted by on August 30, 2018

The Transaction May Be the Largest Colorado Industrial Sale Based on Recent Deals

Denver-based Etkin Johnson is listing for sale a 19-building industrial portfolio totaling 1.95 million square feet spread across Colorado’s Front Range.

Denver-based Etkin Johnson Real Estate Partners said it plans to sell a 1.95 million-square-foot collection of industrial properties it hopes will become the largest industrial transaction in Colorado history based on recent sales amid record construction demand.

Known as the Colorado Industrial Portfolio, the 19 properties are spread across the Front Range from Colorado Springs to Boulder. The portfolio, which Etkin Johnson began acquiring 30 years ago, offers a chunk of industrial real estate that dwarfs those typically sold in Colorado, where large-scale industrial owners are generally long-term holders.

Etkin Johnson Partner and Executive Vice President Derek Conn said he plans to list the portfolio for sale next month. He expects that the portfolio’s purchase price as well as its square footage will make it the largest industrial deal ever to transact in Colorado if a sale is successful.

Industrial real estate has long been Etkin Johnson’s focus, but the development and management company decided to divest the portfolio after being inspired by the record sale prices of other recent large industrial portfolio trades.

“We still love industrial,” Conn said. “We can take this capital and turn it into development and acquisition strategies. It’s not a winding down, but a ramping up. We want to set ourselves up for the next 30 years.”

The Denver area’s industrial market has been on a hot streak for years now. Average rents vaulted to the $9 per-square-foot threshold in the first quarter of 2017 and are climbing, according to CoStar data. Increased demand from major distributors and the rise of e-commerce have pushed levels of new construction to record highs. All of these factors have also motivated property owners to sell, brokers said.

The Colorado Industrial Portfolio is 93 percent leased to a diverse array of tenants, according to marketing materials.

If the company is successful in selling the Colorado Industrial Portfolio, it will still own 1.87 million square feet of industrial space, including properties it has built in its Colorado Technology Center in Louisville, Colorado.

In addition, the company has office and hotel holdings, and is building an apartment complex in north Colorado Springs, the first phase of a 77-acre mixed-use development.

In April, Denver’s Pauls Corp. sold its Gateway Park portfolio in a record-setting transaction. New York-based Clarion Partners purchased the portfolio that included 3.75 million square feet nationwide, of which 1.93 million are located in Colorado, for $206 million.

CBRE Group Inc. Executive Vice President Jim Bolt, who specializes in industrial real estate and represented Pauls Corp. in the deal, told CoStar News at the time that the transaction had attracted an unprecedented level of interest and would reset pricing expectations in the market. Bolt and others on CBRE’s industrial institutional services team will also list the Colorado Industrial Portfolio on behalf of Etkin Johnson on Sept. 5.

Soon after the Gateway Park transaction, a brand-new, 421,000-square-foot industrial park known as Hub 25 sold for $74 million, or about $176 per square foot, compared with a market average of $157 per square foot, according to CoStar data.

Sales like these made the team at Etkin Johnson think about selling some of their older industrial holdings in order to set up a supply of capital that can finance the company’s new projects going forward, Conn said.

Etkin Johnson has $140 million worth of projects under construction right now, but it is looking for the next big tracts of land in Colorado where it can develop, he added.

The company is opportunistic in its development strategy, Conn said, choosing not to pigeonhole itself in any one project type or geographic area in the state. The company is, however, unlikely to develop outside of Colorado in the near future, he said.

Etkin Johnson, which was founded nearly 30 years ago by Bruce Etkin and David Johnson in Denver, also has a property management arm that Conn said will help smooth out any ownership transition.