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Investment firm buys Verizon complex on Garden of the God Road for $31 million

August 30, 2016 Updated: August 30, 2016 at 10:33 am
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The Verizon building (former MCI campus) Monday, August 29, 2016. photo by Jerilee Bennett,The Gazette

A New York-based investment group has acquired the Verizon complex on Garden of the Gods Road for $31 million in the second-largest real estate transaction this year.

A limited liability company created by Fortress Investment Group bought the 726,528-square-foot complex on 129 acres at 2424 Garden of the Gods Road on Aug. 10 from Verizon Business Network Services, according to a deed filed with the El Paso County Clerk and Recorder's Office. The sale is the second largest in the county in 2016 after the $48.6 million sale of the Retreat at Cheyenne Mountain apartment complex in February.

As part of the deal, Verizon is leasing back a part of the complex for its product development, corporate services, wireless and wireline services. The transaction is the third in the past 13 months in which Verizon has sold one of its corporate campuses and leased back part of it, including properties in Richardson, Texas, in July 2015 and Ashburn, Va., in December.

"The sale was well aligned with Verizon's strategy to free up capital while maintaining its operations," said Chad Flynn, vice president of CBRE Capital Markets, Institution Properties, who handled the sale along with Mike Winn and Tim Richey of CBRE in Denver, Matt Hargrove and Mike Shellow of CBRE in Los Angeles and D.J. Decker of CBRE in Dallas. "An institutional investor received rare access to one of the highest-quality office facilities in the market at a significant discount to replacement cost with reliable cash flow and considerable upside potential through lease-up."

A Fortress spokesman did not return a call Monday for comment.

Fortress is one of the world's largest investment firms with $70.2 billion in assets under management as of June 30.

The Verizon building (former MCI campus) Monday, August 29, 2016. photo by Jerilee Bennett,The Gazette 

The company manages assets for more than 1,750 institutional clients and private investors. Fortress lost $23 million, or 11 cents a share, on revenue totaling $464 million in the first half of the year.

"We are seeing more and more institutional owners targeting Colorado Springs and the entire Front Range for strategic investment opportunities, drawn by our region's outstanding quality of life, strong business climate and top-ranking talent pool," said Winn, who is vice chairman of CBRE Capital Markets, Institutional Properties.

The complex was built by Rolm Corp. in 1983 as a manufacturing plant for telecommunications equipment, was acquired by IBM Corp. as part of its purchase of Rolm and was later shut down. MCI Telecommunications Corp. bought the two-building complex in 1991 and more than tripled its size to accommodate its software development and information technology operations that grew to employ more than 6,000 people by 2000. MCI was acquired by WorldCom Inc., laid off much of its workforce after an accounting scandal that forced the company into bankruptcy and a subsequent sale to Verizon.

The telecommunications giant still occupies about half of the building to house about 1,000 employees and contractors, and leases space to a Xerox Corp. call center and Premier Global Services, a web conferencing company. About 17 percent of the building, nearly 108,000 square feet, remains available for lease, according to Turner Commercial Research. The property includes a full-service cafeteria, a 120-seat auditorium and a common-area conference room and break facility, according to a marketing brochure for Colorado Springs Commercial, which will continue to market the space for lease.

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