The Carefree Shopping Center was purchased in May for $19 million.

While pundits like Jim Kramer of CNN’s Mad Money proclaim disdain for the power of real estate, dozens of local, regional and national investors disagree.
Companies like Corporate Office Properties Trust, Healthcare Realty Trust, SVN Equities, United Properties, NexCore, Ventas and Capital Pacific Holdings, parent company of the Banning Lewis Ranch Management Co., have locked in on the Pikes Peak region. Their combined local investment portfolios are worth about $1 billion, and many of their assets have been acquired during the past five years.
In fact, according to those on the front lines of commercial real estate and investment, Colorado Springs and the surrounding area have emerged as one of the country’s hottest markets, due both to its population growth since 2001 and to its massive military presence.
“Even in the multifamily sector, we’ve seen tremendous interest from national and institutional buyers,” said Gary Winegar, chief investment officer for Griffis Blessing and its private investment GB Value Partners II Fund.
He refers to companies like Hamilton Zanze of San Francisco or to the Sentinel Real Estate Corp. of New York, both of which have invested heavily in apartment complexes throughout the city. “Hamilton Zanze has begun divesting some of its properties,” he said, “but others are there to take their place.”
Winegar cites several reasons for investors’ fascination with Colorado Springs. Foremost is the abundance of investor capital that is circling secondary and tertiary communities — just looking for a profitable place to land.
“Even the big institutional companies with billions of dollars to spend are now looking at smaller markets for well-performing acquisitions,” he said. “They usually focus on Class A properties.”
Griffis Blessing has been able to compete, in many cases with outside investors — and expects the local multifamily and commercial markets to continue to benefit from cash-rich investors looking for a good deal.
“Because we’re close to the market and there’s generally less competition in smaller communities, we know where the good Class A and Class B value-added opportunities are,” Winegar said. “We’ve been able to make some very successful investments here and in Denver since we opened our latest fund in October.”
George Swintz, vice president of leasing and development for Corporate Office Properties Trust estimates that the Columbia, Maryland-based REIT will have invested more than $300 million by the time it completes three new office buildings at the Colorado Springs Airport Business Park and the Patriot Park project.
“We have already acquired 853,000 square feet of existing office space in the market,” he said, adding that another 325,000 square feet of Class A office space is on the drawing board for development during the next two years. “And that’s not counting several parcels of land we’ve bought for future development.”
Swintz said that Colorado Springs has “come of age” as an investment center.
“Our population now exceeds 500,000, and the scale of investment we’re attracting is much larger than in the past,” he said. “Institutional buyers aren’t looking for $8 (million) to $10 million opportunities. They want something larger — and with our growth in the last few years, we have a lot more to offer.”
Kent Mau, managing broker for Sierra Commercial Real Estate has worked with a variety of private and institutional investors. He admits that California buyers have provided a large percentage of Colorado Springs commercial real estate investment, but said that Texas companies have entered the market as well.
“Investor buying has been up for the last two years, much more than the two to three years prior,” he said. “Companies have seen our growing economy and that we have plenty of product available. Things have slowed down because of the mortgage market. There’s also not as much left to buy. But the big resources out there in commercial real estate can usually work around the mortgage market. We’re also seeing investment cash coming from off-shore.”
He said Colorado Springs is a less risky place to invest than it was 10 years ago, citing the virtual sellout of developable land at Briargate Business Park and along north Interstate 25.
An even more dramatic snapshot of the commercial market came from Chris Bodnar, a broker with C.B. Richard Ellis in Denver.
CBRE has sold 45 properties in Colorado Springs during the last 18 months. Thirty-seven of those were purchased by California buyers and 29 of the sales represent new capital coming into the state.
He said the attraction of the Pikes Peak region is its “unbelievable prices and 5 percent cap rate.”
“Many of our clients are doing 1031 Exchanges,” Bodnar said. “They look at their own market and the prices are so high.”
Projects the company has closed in Colorado Springs since the beginning of the year include the sale of the Academy Point Service Center near Fountain and Academy boulevards for $5 million, 3500 N. Nevada Ave. (the Farmer’s Insurance building) for $2.8 million, the Albertson’s center at 6905 Austin Bluffs Parkway for $9 million, the Carefree Shopping Center for $19 million and the Cheyenne Mountain Montana Center at South Academy Boulevard and Highway 115 for $11 million.
The company also has several offers pending on office and retail buildings, including the vintage 300,000-square-foot Chidlaw Building, the downtown 45,000-square-foot Pavillion Medical Center and on a 5,000-square-foot retail center in Fountain.
“On top of closed sales, we currently have another half a million square feet in Colorado Springs either listed or under contract to close for a total of about $50 million,” he said.
Becky.Hurley@csbj.com