TRIGATE CAPITAL PURCHASES TOWNE CENTER AT BROOKHILL

A Dallas-based company recently purchased what was one of the first “power centers” in the Denver metro area.

TriGate Capital acquired the Towne Center at Brookhill, a 305,000-square-foot community shopping center at Wadsworth Boulevard and West 88th Avenue in Westminster.

When developer Jim Sullivan opened the first phase in 1985, the idea of a power center anchored by big-box retailers was a relatively new concept.

Since then, like many big-box tenants themselves, the center has experienced its share of ups and downs.

The Towne Center at Brookhill, after selling for a premium during the peak of the market in 2006, was later lost to the lender in the wake of the real estate crash.

“We are always looking for opportunities that provide good value for our investors,” said Jeff Yarckin, a partner at TriGate, which manages more than $2.5 billion in commercial real estate assets for clients.

The Towne Center at Brookhill is just the kind of potential turnaround story it seeks.

“This was a very large property that traded back in 2006 for $42 million,” Yarckin said.

“We like to buy properties from lenders and that is what we did with the Towne Center,” Yarckin said.

“We paid almost a third of what the previous owner did.” Buying it at such a huge discount means TriGate can afford to upgrade the property and give tenants a good deal.

“TriGate’s favorable investment basis gives ownership the ability to invest in property upgrades and attract tenants with competitive rental rates and tenant improvement allowances,” said Jason Obenhaus, a vice president at TriGate.

Yarckin estimates the replacement value is about what theprevious owner paid for it.

“The previous owner bought it at the peak and financed it at that time at a much higher interest rate than in today’s market, and it was not too long after that it went into distress and was taken back by its lender,” Yarckin said.

Such scenarios are common all across the country.

“Generally speaking, if a property was acquired in the mid-2000s, and financed at the time, particularly with commercial-backed securities from Wall Street, they have issues and often went back to the lender,” he said.

It doesn’t matter how nice of a center it is or how well located, he said.

“The Towne Center at Brookhill is a beautiful center,” Yarckin said.

“Even though it was built in 1985, it was really ahead of its time and is more modern looking than you would think for a center of that age,” Yarckin said.

“Also it underwent a major renovation around 2004,” he said.

Such distressed properties provide great upside potential for a group such as TriGate, he said.

“We’re· value investors,” he said.

Because the property had been languishing for a number of years, “it was perhaps not as it could have been,” he said.

”We will do a much better job to make sure it is well managed.”

TriGate hired SullivanHayes Brokerage to lease the center. It is currently 74 percent leased.

Tenants include Burlington Coat Factory, Bed Bath and Beyond, Lamps Plus, Black Eyed Pea, Honey Baked Ham and Chili’s.

The property is shadow anchored by a Home Depot, which was not part of the purchase.

One of the big selling points of the development is that it is on Wadsworth Boulevard, said Bryan Slaughter, part of the SullivanHayes Brokerage team leasing it, which also includes Brian Shorter and Michael Kendall.

“In general, anything on Wadsworth does well, because it is the major north-south road through Westminster and that region,” Slaughter said.

While the center is close to the former Westminster Mall, which will be replaced by a more urban-style, mixed-use development that will serve as the de facto downtown for Westminster, the Towne Center at Brookhill doesn’t seem poised to benefit from it at this time, he said.

“I know the city has some pretty big plans for the old mall, but we aren’t hearing anything from retailer that they want to be close to it,” Slaughter said.

“What retailers really like is that it is on Wadsworth,” he said.

Research by SullivanHayes found that about 90,000 vehicles drive by the center daily on Wadsworth and 88th.

There are 16,987 people living within a mile radius, with an average household income of $60,322. Within a three-mile radius, there are 107,856 people, with an average household income of $72,640.

Slaughter said the Towne Center at Brookhill has a lot of potential and can accommodate a large range of tenants.
“We have space for 1,000-square-foot tenant up to 40,000 square feet,” he said.

The center could accommodate a 40,000-sf anchor by combining three adjacent spaces on the northeast side of the center, he said.

He expects that lease rates will run from $10 to $25 per sf, depending on the tenant, the location in the center and terms of the lease, he said.

“We’ve only been leasing it for a week or two, but we already have interest from a wide variety of tenants,” he said.

They include quick-serve and sit-down restaurant, fitness groups, massage therapists, and “general retailers,” he said.

He said a Family Christian Book Store will soon be leaving, freeing up a 10,000-sf space.

Slaughter said TriGate is committed to turning around the center.

“They are willing to do whatever it takes,” he said. “That could mean tearing down existing spaces or bu i ld i ngs on pad and replacing them wit h new buildings,” he said. “They will be very creative.”

That is exactly right, said Yarckin.

“We are going to put a substantial amount of money into repositioning it,” Yarckin said.

“It is hard to say how much, because we will be very entrepreneurial and do what it takes to reposition it,” he said.

“But we are talking about millions,” he said, when renovation costs, tenant improvement packages and brokerage fees are included.

He said that TriGate typically holds an asset for three to seven years.

“I’m guessing in this case, it will be a five-year or a five­year-plus hold, although we have no requirement to hold it or sell it within a specific time frame,” he said.

He said it is interesting that Jim Sullivan developed the Towne Center at ‘Brookhill and it is now being leased up by SullivanHayes, a company that Sullivan founded and later sold.

“It is kind of ironic,” Yarckin said. “Honestly, it is more of a coincidence than anything. We were looking at the best brokers to lease it and SullivanHayes rose to the top. We didn’t make the connection” with the company’s founder.

Source: Colorado Real Estate Journal