A suburban Philadelphia firm purchased 15 top-quality Colorado Springs office buildings Thursday in one of the city's biggest-ever office deals.
Patriot Equities, a private real estate development and investment firm, paid an undisclosed amount for the properties, which were part of a 21-building local portfolio owned by Corporate Office Properties Trust, a Maryland-based publicly owned real estate investment trust.
COPT put 16 of its buildings up for sale in January, and company officials said in an earnings conference call that month that the properties could fetch roughly $160 million.
Patriot Equities declined to disclose its purchase price because of a confidentiality agreement with COPT. But the deal was in the ballpark of the $160 million figure, even though the company didn't buy all 16 buildings, said Geof Gardner, chief investment officer and a principal with Patriot Equities.
Such a price, and the buildings' nearly 1.2 million square feet, would make Patriot Equities' purchase one of the city's largest in terms of dollars and the amount of space acquired, said Peter Scoville, a broker with Cushman & Wakefield/Colorado Springs Commercial. His firm worked with Patriot Equities and COPT on the deal.
Patriot Equities' acquisition, its first in the state, includes seven buildings in the north side InterQuest office park area; five buildings in Patriot Park at Powers Boulevard and Platte Avenue; and three buildings near the Colorado Springs Airport and Peterson Air Force Base.
COPT entered the Springs in 2005 because several of its Washington, D.C.-area defense and aerospace tenants had operations here. Through purchases of some buildings and construction of others, COPT quickly became the city's largest office landlord. In late 2011, however, COPT decided to exit the Springs, in part because it wanted to reduce its exposure to "slower-growth markets," among other factors.
Even so, the occupancy rate of COPT's office buildings in the Springs had jumped to nearly 83 percent as of Sept. 30, up from 77.8 percent a year ago, according to the company's third quarter earnings statement. Patriot Equities officials say the buildings are now more than 90 percent leased.
Patriot Equities was attracted to top-of-the-line buildings owned and developed by COPT, Gardner said. The buildings are considered Class A properties, so rated because of superior amenities and locations.
"They're certainly, in our view, the best buildings in that market," Gardner said. "From a pure real estate fundamentals standpoint, they're very appealing."
Even though several tenants are defense and aerospace related, Gardner said Patriot Equities' research showed many of the firms' have a role in "mission critical" functions for the military. As such, Patriot Equities believes Department of Defense spending cuts won't lead to major tenant losses.
"Where some people saw a risk there, we saw a nice stable base of activity with those sorts of functions," he said.
In fact, Gardner said, Patriot Equities interviewed a majority of building tenants, and a near unanimous number said they expected to grow, not shrink. Also, Fort Carson is in line for growth, he said.
Scoville said Patriot Equities' purchase shows large investors are bullish on the Springs, and the company's acquisition should attract more out-of-town capital to the market.
"You have people that are looking at this community as a glass half full, not half empty," Scoville said.