Flatiron Park, the east Boulder business park whose “mystery tenant” almost certainly is Apple, could set a record for sale price in the Boulder market, with owners seeking at least $600 million for the 1-million-square-foot portfolio.
An executive summary prepared by commercial brokerage Jones Lang LaSalle Inc. (NYSE: JLL) and obtained by BizWest for the 21-building portfolio does not include a listing price. But several commercial real estate brokers familiar with the offering said that owner Crescent Real Estate LLC is seeking at least $600 million for the properties.
That amounts to $600 per square foot, far in excess of what at least one similar portfolio sold for recently — although commercial real estate prices have been soaring.
The 485,000-square-foot Pearl East Business Park, for example, sold in July for $190 million, or $391 per square foot. That was $40 million more than the selling owners paid for the property just two years prior and 123% higher than the $85 million that longtime owner W.W. Reynolds Cos. sold the complex for in 2015.
And Boston-based Tritower Financial Group LLC in June acquired the 60,030-square-foot former Trimble building at 2300 55th St. in Flatiron Park for $21 million, or $349.82 per square foot.
But other recent deals involving global tech users have seen much higher sale prices per square foot.
Google in September paid $97.8 million — or $782.40 per square foot — for a 125,000-square-foot office building in The Réve development across from its main campus at Pearl and 30th streets. But that was for a brand-new building directly across the street from its main campus.
Atlanta-based Invesco Ltd. in January purchased the Pfizer campus in Boulder for $99 million, or $653.96 per square foot. Like Apple, Pfizer is a global enterprise with a longer-term lease on the facility.
BizWest reported on Friday that Crescent’s Flatiron Park portfolio had hit the market, touting an “Undisclosed AA+ Tech Tenant,” with several business units in the park totaling 239,923 square feet, including:
- A new 12.5-year lease for a division that will be constructing and redeveloping a “mission-critical facility at 2300 and 2400 Central Ave.”
- 60,000 square feet at 5718 Central Ave.
- 15,160 square feet leased at 5777 Central Ave.
Several factors pointed to Apple as that mystery tenant, including its distinctive silver Apple logo visible through the entryway at 5718 Central, as well as other Apple signage. Apple has also applied for fire permits at that address.
A JLL official did not return a call seeking comment.
A commercial real estate broker who asked to remain unidentified said the new facility at 2300 and 2400 Central Ave. likely paves the way for Crescent to seek a high purchase price for the entire 1-million-square-foot portfolio.
A 12.5-year lease — at a high rental rate with a stellar tenant such as Apple — means that a buyer likely could flip that part of the project, perhaps for as much as $1,000 per square foot. That would help justify the higher price for the rest of the portfolio, while Apple’s presence would help drive up rental rates in the rest of the park, the broker speculated.
“Apple’s a long-term lease at a very high rent,” the broker said. “The other rents don’t make sense in the rest of the portfolio for the cap rate and the sale price. The play is probably you buy it, flip Apple at a gazillion dollars a foot — probably like $1,000 — and then all of a sudden, the returns start making sense on the rest of the portfolio, and then you have the ability because you’re commanding that sort of market, to dramatically increase the rents — I bet you’ll be able to increase them by $8 to $10 a foot over the next few years.”
If a deal goes through at the desired sale price, it could be a turning point for commercial real estate in the Boulder market, the broker said.
“I really think this is going to be another milestone in our market, where it’s really going to dramatically raise the rents closer to California rents than Boulder rents.”
A sale price in the magnitude of $600 million or more also could raise the value of other properties in Boulder, especially other buildings within Flatiron Park itself. The park includes about 2.3 million square feet overall, with numerous individual building owners alongside Crescent’s million-square-foot portfolio.
“They’re all going to get a step up in value,” said Geoffrey Keyes, managing broker for Skye Commercial LLC in Boulder, which is not involved in the Flatiron Park portfolio sale, “regardless of the tenancy and regardless of the rents and regardless of the cap rate.
“When the next-door neighbor’s house sells for $2 million more than your house, the values just correspondingly increase,” Keyes added. “So everybody’s value, just by virtue of being close to the Apple campus and the high-dollar rents, I think those values may increase. It’s maybe not so good news for tenants because I think rents will have to go up to make the numbers work in all of these buildings.”
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