Colorado Chapter Spotlight

Colorado Chapter Spotlight Special Section

Colorado Real Estate JournalJuly 2016 • Section B

INS IDEFrom the top

NAIOP Colorado continues to gain steam, providing more than 600 members with

networking, education and legislative advocacy, according to chapter President Kevin Kelley

Midyear Market UpdateDenver’s commercial real estate market

is poised for continued expansion

Count ‘em

Eight ways to get involved in NAIOP Colorado

Can it be done?Pursuing condominium development

under current construction defects law

Expert testimonyNAIOP Brokers of the Year assess

the market and what lies ahead

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Photos courtesy of NAIOP Colorado/SE Photography

Page 2B — COLORADO REAL ESTATE JOURNAL — July 6-July 19, 2016

S o far, 2016 has been a record-breaking year for the Colorado chapter

of NAIOP. This growth reflects not only the strength of our chapter, but also the strength of our Denver and Colorado markets. It has been another strong development year in the commercial sector, and I am happy to report all engines are firing in this market!

Two key accomplishments this year for our NAIOP chapter include broadening our membership base and increasing sponsorship. We now have representation from the construction, architecture, engineering and title insurance fields, in addition to our long-term membership base of real estate developers and owners, real estate investors, service providers, and investment and leasing brokers. Let me again extend a warm welcome to our new members. We’ve also seen a spike in sponsorship, with a 25 percent increase in donations over the previous year, and saw record atten-dance at the Rocky Mountain Real Estate Challenge and our Awards of Achievement events. Thank you to our generous sponsors for making this prog-ress possible.

I’m proud to say I believe the NAIOP Colorado Chapter is

the premier real estate organization in Colorado and, with more than 600 mem-bers, one of the largest and most active NAIOP chapters in the country. That’s no small feat: Nationally, NAIOP rep-resents more than 15,000 members and boasts a

significant and influential lob-bying group.

In 2016, the board of direc-tors for the Colorado chapter of NAIOP continued our focus in three areas:

• Networking: to continue to expand and create meaning-ful opportunities for real estate professionals to spend time together,

• Education: to deliver meaningful programs that provide timely and relevant information to the real estate community and

• Legislative affairs: to have NAIOP represent the real estate community in criti-

cal legislation and community affairs that affect the real estate environment.

In 2016, the Colorado chap-ter has provided opportunities for networking and educa-tional advancement in many ways. The Rocky Mountain Real Estate Challenge pitted real estate students from the University of Colorado and University of Denver on a chal-lenging parcel located in the city of Westminster’s mall rede-velopment district. The Annual Awards banquet recognized the best and brightest of the com-mercial and residential broker-age community, and a property tour featured a ride on the commuter rail line from Union Station to the DIA Westin. Upcoming events include a construction education series plus, back by popular demand, Fight Night and the Winter Hockey/Curling Classic.

In an election year like this, NAIOP’s legislative affairs role of understanding criti-cal issues being discussed in the Legislature and provid-ing timely communication to our members to keep them informed is more important than ever. In particular, NAIOP Colorado and the members of the Legislative Affairs Committee have monitored the dialogue on construction

defect litigation, affordable housing, urban renewal dis-tricts and many other issues confronting our industry today. There are great opportuni-ties for NAIOP members and the real estate community to work together to support and maintain our representation in the Senate and the state of Colorado, and to confront the issues facing development at the local and state levels. For example, we are seeing a push to raise impact fees for afford-able housing in Denver that could be onerous for develop-ment and ultimately make the

city less competitive.I am honored to have the

privilege of serving as the 2016 NAIOP Colorado Chapter president and working with our members. Surrounding me is a team of great colleagues on the board, committees and staff who give 100 percent to keep our chapter strong, and I thank them all for their efforts. I encourage our members to serve on a committee to help us build on our progress.

So let’s keep those economic engines firing on all cylinders to propel us forward for the rest of the year!

Kevin Kelley 2016 NAIOP

Colorado Chapter president

Kelley is senior vice president of United Properties

and regional director of its

Colorado office.

P R E S I D E N T ’S M E S S A G ENAIOP, economic engines are firing on all cylinders

NAIOP’s legislative affairs

role of understanding critical issues being discussed in the

Legislature and providing timely communication to our members to keep them informed is more

important than ever.

http://www.signatureflip.com/sf01/article.aspx/?i=8164

July 6-July 19, 2016 — COLORADO REAL ESTATE JOURNAL — Page 3B

W ith Denver’s com-mercial real estate markets basking

in a sweet spot after six years of consistent and broad-based strengthening, we’re turn-ing our focus to the market outlook and specifically the timing of the next recession. After all, the cyclical nature of the industry is no secret to real estate enthusiasts and is a “top-of-mind” question at this stage in the game.

At the national level, real estate cycles closely mirror eco-nomic cycles as represented by the unemployment rate trend, particularly for the office, industrial and apartment sec-tors (See Figure 1). A recent forecast based on unemploy-ment rate cycles by Richard Barkham, CBRE’s global chief economist, projects a mild U.S. recession beginning in either late 2018 or early 2019 with a corresponding rise in commercial vacancy rates. This timeline allows investors, own-ers and occupiers ample time to prepare for the market shift while still deploying capital as opportunities arise.

Because real estate is local, it’s important to consider market-specific dynamics, including demand and supply relationships, when assessing the outlook for Denver’s prop-erty markets. The correlation between an individual mar-ket’s unemployment rate and vacancy rate trends may appear more variable at the local level than for an aggregation of markets. Per Figure 2, the correlation between Denver’s unemployment rate and office vacancy rate is the strongest but still valid among the other property sectors.

If real estate cycles (both national and local) are tied to economic cycles, let’s review Denver’s economic cycle posi-tion to help gauge when com-mercial vacancy rates might increase.

On the job market front, Denver reached full employ-ment (typically considered 5 percent unemployment) more than two years ago, and cur-rent unemployment stands at 3.3 percent (March prelimi-nary), according to the U.S. Bureau of Labor Statistics. The region’s tight labor market may in fact be restricting hir-ing activity in certain industries because it can take longer than expected to hire the right can-didate before that candidate is snapped up by another firm.

An increase in the unem-ployment rate should not imply a fundamental market shift locally until unemploy-ment approaches 5 percent, which is not anticipated in the near term because ongoing job growth has yet to subside. For the last three years, the region’s employment base has expanded by 50,000 or more jobs annually. Underscoring this impressive expansion, the only other consecutive period of job growth exceeding 50,000

jobs annually was in 1999-2000.

As of April 2016 (pre-liminary), year-to-date job growth is up 2.8 percent for the Denver-Boulder region, and the region is on pace to add 43,300 jobs this year.

While the pace of expansion has slowed since last year, the total number of new jobs in the market remains meaning-ful. Office-using jobs are up 2.8 percent so far this year compared to a more modest 1.7 percent year-to-date gain for industrial-using jobs. Retail- and hotel-related job growth is up 3.7 percent year to date (April 2016).

Paralleling impressive job growth, commercial vacancy rates in Denver are at either their lowest position of the cur-rent cycle or near the bottom, with the exception of apart-ment vacancy, which has ticked up for the past three quarters to a still-tight 5.4 percent.

Any softening in commercial vacancy in the near term does not indicate a slowdown in demand for commercial real estate. Instead, the culprit is the addition of new supply. Construction activity is gener-ally at healthy levels and will be absorbed in reasonable time. According to CBRE Research, $4.2 billion of commercial con-struction is underway in the Denver market and about half of the total is tied up in hotel and multifamily projects.

• About 2.8 million square feet of mostly speculative office development is underway and scheduled to deliver over the next 18 months. For compari-son purposes, today’s pipeline of office development is less than the prior-cycle peak of 3.4 million sf (2008).

• Industrial construction is at the highest level since 2001 with 4.4 million sf underway, but the sector’s tight vacancy rate of 4.7 percent and 24 quarters of consecutive posi-tive absorption suggest the new supply is warranted.

• Less than 700,000 sf of retail is being developed, which is well below prior cycle highs by a few million sf. E-commerce headwinds are contributing to the modest level of retail development in the market.

• Concerns about the pipe-line of multifamily units under construction are understand-able given the 26,000 units that delivered in the past five years, according to CBRE Econometric Advisors. The addition of new multifamily units in the market is already increasing concessions and slowing rental rate appre-ciation; further deliveries will

improve affordability to some extent.

Overall, the outlook for commercial real estate market fundamentals through the lens of job growth and vacancy rates reveals a couple of key insights. First, given Denver’s below-nat-ural unemployment rate and ongoing job growth (70 con-secutive months), there are no indications that the local eco-

nomic cycle exhibited by the unemployment rate will begin contracting anytime soon. Second, although we anticipate modest near-term softening in Denver’s commercial real estate vacancy rates, this will not be the result of a slow-down in demand but rather prompted by new supply across all property sectors. New sup-ply is a critical component in

meeting the needs of both in- and out-of-market tenants look-ing for office, industrial and retail space as well as residents migrating to the region and organic household creation. Vacancy rates may tick up in the near term, but it is not a signal of decline in Denver’s real estate market – rather it is a sign that the market is poised for continued expansion.

Jessica Ostermick

Director, Research & Analysis, CBRE,

Denver

M I D Y E A R M A R K E T U P D AT EWhat’s ahead for Denver’s commercial

real estate market?

NAIOP Colorado 2016 Calendar of EventsJuly 7 Mid-Year Forecast Breakfast, Denver Marriott City CenterJuly 20 Developing Leaders Project Tour, Denver VA Medical CenterAugust 17 2016 Educational Series, Holland & Hart LLPAugust 18 NAIOP Winter Classic: Hockey, Sport Stable, Boulder ValleySeptember 13 Election Breakfast, Denver Marriott City CenterSeptember 21 2016 Educational Series, Holland & Hart LLPSeptember 25-26 NAIOP Commercial Real Estate Conference, Scottsdale, ArizonaSeptember 28 NAIOP Winter Classic: Curling, Denver Curling ClubOctober 13 NAIOP Fight Night 2016, Infinity Park, GlendaleOctober 19 2016 Educational Series, Holland & Hart LLPNovember 1-2 NAIOP Corporate O.CON: The Office Conference, Los Angeles, CaliforniaNovember 8 Breakfast Event, Denver Marriott City CenterNovember 16 2016 Educational Series, Holland & Hart LLPDecember 8 Annual Holiday Reception, The ART Hotel, Denver

For more information or to register for these upcoming events and programs, visit NAIOP-Colorado.org or call us at 303-782-0155.

Source: CBRE Econometric Advisors and Macrobond, CBRE Research U.S. unemployment correlation with commercial vacancy rates

Source: US Bureau of Labor Statistics, CBRE EA, CBRE Research Denver unemployment correlation with commercial vacancy rates

http://www.naiop-colorado.org



N AIOP Colorado is the state’s leading com-mercial real estate

industry trade group. NAIOP’s mission has three areas of emphasis: education, legisla-tive advocacy and networking. To further its mission, NAIOP offers a full calendar of events throughout the year, almost all of which are open to members and nonmembers alike.

1. On July 7, NAIOP will hold its annual Mid-Year Economic Forecast Breakfast at the Marriott City Center. This event will be moderated by Kevin McCabe of Newmark Grubb Knight Frank and will feature several of the region’s top commercial real estate minds offering their outlooks for the remainder of 2016 and beyond.

2. On Aug. 18, lace up your skates for the Winter Classic Hockey Tournament, to be held at the Edge Ice Center in Littleton. Spectators and players are welcome for this always-sold-out annual net-working event that benefits Children’s Hospital Colorado. A corresponding curling event

also will be held Sept. 29 at the Denver Curling Club.

3. August also marks the start of NAIOP’s four-part Educational Series. This year the series will take an in-depth look at the role construction activities have on the overall real estate and development market. These breakfast events offer an intimate atmosphere and will be held once per month through November at the newly renovated offices of Holland & Hart.

4. Oct. 13 will mark the annual Fight Night at the Infinity Park Event Center in Glendale. This limited-capacity black-tie event offers unpar-alleled networking with the industry’s elite in an exciting and fun atmosphere with din-ner, cocktails and live amateur boxing. Sponsorships for this event, only in its fourth year, sell out in a matter of days.

5. Finishing out the calendar year, NAIOP will partner with the Denver Metro Commercial Association of Realtors for their annual Holiday Reception to be held at the Art Hotel. This members-only

event will include drinks, appe-tizers and networking with some of Denver’s most promi-nent commercial real estate industry members.

6. NAIOP helps ring in each new year with an Economic Forecast event held in early January.

7. February is time for NAIOP’s annual Awards of Achievement, which hon-ors the “best of the best” in Colorado’s real estate industry. Held with a popular late after-noon format, the event will fea-ture an awards program honor-ing brokers of the year in each product category, transaction of the year, president’s awards and many others, followed by a cocktail reception.

8. Rounding out the cal-endar of events is NAIOP’s Rocky Mountain Real Estate Challenge, which is held each April. This event pits the MBA students in CU’s and DU’s real estate programs against each other in a contest to develop a plan for transforming a chal-lenging, high-profile site into a dynamic and successful real estate development. One of the

most successful programs of its type in the country, the event routinely draws more than 700 attendees. Past challenge sites have included Midtown Industrial Center in RiNo and downtown redevelopment projects in Parker, Boulder and Westminster.

Complementing these annual events are many other events hosted with partner organi-zations such as Urban Land Institute Colorado, Denver Commercial Association of Realtors, the Denver Metro Chamber of Commerce and Downtown Denver Partnership. There also are Developing Leaders events aimed at the next generation of commer-cial real estate profession-als, including project tours, mentor-mentee pairings and exclusive access to some of the most accomplished veterans of the industry.

NAIOP Colorado’s legislative arm, the Common Cents Fund, holds several events through-out the legislative session, allowing its members to stay on top of legislative activity, to meet legislators and lobby-

ists and, most importantly, to have their voice heard in the General Assembly.

The national NAIOP orga-nization also hosts its own full slate of events throughout the year to bring members of its local chapters together and offer those members a national perspective on the commercial real estate industry. Last year NAIOP held its marquee event, Development ‘15, in Toronto, Ontario, Canada, highlighting the Toronto real estate indus-try’s rising prominence on the national stage. The national NAIOP organization offers participation in its National Forums programs, which allows members of its local chapters to network nationally with other commercial real estate professionals on a variety of topics.

This is just a snapshot of all of the programming that NAIOP Colorado offers its members each year. Whether it’s networking, education or legislative involvement, NAIOP Colorado offers a wide variety of ways to enhance a career in commercial real estate.

Eight ways to get involved with Colorado’s commercial real estate industry

PresidentKevin C. Kelley Senior Vice President, Development United Properties 720-898-5872 [email protected]

President-elect/Finance Chair James J. NeenanPresident and COOPrime West Companies 303-741-0700 [email protected]

Legislative Affairs Chair Timothy E. Reilly, Esq.Associate Fairfield & Woods, P.C. 303-894-4449 [email protected]

Membership ChairTyler ReedVice [email protected]

Program Chair Michael Strand Shareholder Polsinelli PC 303-583-8266 [email protected]

At-Large Officer Mark J. WitkiewiczSenior Vice President McWhinney [email protected]

Immediate Past President J. Jeffrey Riggs PresidentBaron Properties/Essex Financial [email protected]

Penultimate Past President Lea Ann T. Fowler ShareholderBrownstein Hyatt Farber Schreck LLP [email protected]

Director James M. MansfieldVice President/Managing Director Pinnacle Real Estate Advisors LLC303-962-9556 [email protected]

DirectorChristopher R. King PresidentDPC Development [email protected]

DirectorAlan Colussy PrincipalAlan Colussy Architecture [email protected] DirectorRandall C. Hertel Senior Vice PresidentMajestic Realty [email protected]

DirectorPaul T. Luber Asset ManagerStoltz Real Estate Partners [email protected]

DirectorDoris J. RigoniDenver Vice President [email protected]

DirectorSherri GoldsteinAssistant Vice PresidentLand Title Guarantee [email protected]

DirectorTim SchlichtingPrincipalLCP Development [email protected]

DirectorCeleste TannerChief Development OfficerConfluent [email protected]

DirectorJustin Lutgen Acquisitions DirectorDPC Development [email protected]

DirectorThomas KooimanDirector of Business Development- Western Region Brinkmann [email protected]

Director/DL RepresentativeIan Nichols Director of AccountingBaron Property Services [email protected]

Director/Corporate Board MemberJames M. Mulligan PartnerHusch Blackwell LLP [email protected]

Director/Corporate Board MemberWilliam D. Lawrence Senior Vice President Development Services Transwestern [email protected]

Honorary Lifetime DirectorJohn O’Meara

Honorary Lifetime DirectorRobert F. Moody Denver Energy [email protected]

Executive DirectorKathie Barstnar NAIOP Colorado Chapter [email protected]

StaffJayma FileManaging DirectorNAIOP Colorado [email protected]

NAIOP – Colorado 2016 Board of Directors

mailto://[email protected]



























T he legislative session included the introduction of 468 House bills and

217 Senate bills. The number of House bills may be a record.

What were the results of these efforts for the real estate indus-try? The passage of two reactive bills: a bill to clarify last year’s urban renewal/tax-increment financing law and a bill to address the election process for special districts given the uncertainty of a recent Colorado Court of Appeals decision.

What about the effort to cor-rect the continued imbalance in the housing market by way of construction defects reform? If you are unaware of the answer to this question, then let me break the news: No bill was introduced; therefore, there will be no pro-active measures to address this issue. This result is especially disappointing to most in the industry and to the greater busi-ness community. Each of these legislative issues is explained fur-ther below:

Urban Renewal/TIF: The Senate introduced SB 16-177 to clean up issues with last year’s bill, HB 15-1348. NAIOP and

other stakeholders pushed to clarify the dispute resolution process if there is disagreement about whether tax increments should be shared between a city and county governments to off-set the impacts of urban renewal projects.

The bill also clarifies that last year’s bill was not intended to jeopardize the existing financial obligations of an urban renewal board that remain outstanding as of December 2015. The bill failed to address the uncertainty regarding the bill’s application to existing projects. Some par-ties believed the law would not apply to projects approved prior to Jan. 1, 2016. While other parties believed the law should apply to projects approved, but for which financing had not yet began prior to Jan. 1, 2016. The applicability issue remains open and may be subject to legislation next year.

Special District Elections: In the final weeks of the session, on April 21, the Colorado Court of Appeals issued a decision in Landmark Tower Association v. UMB Bank, hereinafter the “Marin” case. The Marin case

relates to the Landmark development in Greenwood Village – spe-cifically to the taxes levied by a special district and the election process used to form the district.

In sum, the Marin court concluded

that the purchase and sale con-tacts used to qualify the electors – who were the developers of the project – were a sham and, therefore, the tax elections were invalid. It has been common practice to use purchase and sale contracts to qualify electors in special districts.

The decision may be subject to further appeal, but it essen-tially calls into question the valid-ity of previously held elections and could potentially adversely impact the bond market. This uncertainty prompted legisla-tion, SB 16-213, to prohibit any contest to the results of a special

district election prior to April 21, 2016, on the grounds that any person voting at the election was not eligible to vote, and to vali-date the qualification of a person elected or appointed to a special district prior to April 21, 2016. The bill passed both chambers and was signed by the governor. A future bill may be necessary to further address and clarify the election process for special districts.

Construction Defects Reform: If you recall last year, Senate Bill 15-177 sought three changes to Colorado’s Common Interest Ownership Act to: (i) increase the required notice to unit owners about the potential cost and impact of construction defect litigation, i.e., informed consent; (ii) prevent the removal of arbitration provisions from a community’s governing docu-ments; and (iii) allow a majority vote of unit owners to bring a claim versus a few board mem-bers.

The bill’s goals were to encour-age condominium construction, which has severely lagged behind all other product types, and to provide an affordable option

for homebuyers. A compromise bill was drafted to include the informed consent and voting changes. A Colorado Court of Appeals decision addressed the third piece relating to the remov-al of arbitration provisions, so it was not included in this year’s draft.

The compromise bill was intended to be part of a “hous-ing package” that would include, among other things, the exten-sion of the time to allocated low-income housing tax credits and the creation of a tax exemption for money deposited in a first-time homebuyer savings account.

The negotiations regarding the compromise bill failed, and a construction defect bill was never introduced. The failure was due to the weight of tra-ditional interests relating to construction defects litigation, and reform. However, the bill extending the time to allocate low-income housing tax credits and tax exemption for first-time homebuyers both passed and are awaiting the governor’s sig-nature.

Reilly is a director with Fairfield and Woods in Denver.

A s is now well-known, the lack of condo-minium development

in Colorado during recent years has contributed to the lack of supply for such separately owned multifamily product. This is particularly true in the moderately priced market (under $400,000).

Many plans, proposals and efforts have been made, and continue to be made, to address legislative and related solutions to break loose the logjam in construction for such housing. The main culprit seems to be the state of our construction defect laws in Colorado, and efforts to address such matters through legislation failed once more during this last legislative session.

What to do in the meantime, where supply is extremely low and demand appears extremely high at most all pricing levels? The market seems to be cry-ing out for this undersupplied product.

Aware that there is likely an entitlement period before actual construction can begin and the market window is limited, some entrepreneurial developers are taking the leap, but doing so pursuant to care-fully designed mitigation plans as a part of the overall project plan that is intended to create a quality project and, at the same time, also avoid or lessen exposure to defect claim liabil-ity. Nothing is perfect and the extent of protections afforded

by such mitigation plans is not assured. With this in mind, we can explore some of the ideas that have been generated by those in the business as a means to hopefully provide some mea-sure of comfort to these brave souls.

The main themes in these plans seem to include, in addi-tion to the normal pursuit of quality projects, disclosure, transparency, peer review, com-munication and responsiveness.

Let’s look at an overview of the process of pursuing a condominium development in Colorado.

Planning Stage. The con-version of existing rental prod-uct is one aspect of this issue, and some developers are pursu-ing this avenue with a view to carefully allocate the risk, where possible, in the agreement to purchase the existing property. The specific allocations would address, for example, the major elements of the property that would be retained and used in the conversion, and those that would be redeveloped or added by the conversion developer.

More standard PSA provi-sions in the purchase of existing product, such as the “as is where is” provisions, would need to be restructured where possible to account for this allocation.

Some developers are planning projects whose size (e.g., under 20 units) and/or ownership structure (e.g., townhome/lot structure with little/no com-mon area vs. condominium with

attendant homeowner’s association) allows the project to be at least par-tially exempt from the state statutes gov-erning such common-interest com-munities.

Such statu-ary exemp-tions allow for more realistic protections

for the developer to be built into the project’s governing and sale documents. When little or no common elements or home-owner association involvement is needed, the risk of exposure is reduced.

Others are now pursuing larger projects but with a more in-depth planning, contract-ing, disclosure and communi-cation approach to head off concerns of unit buyers before, during and following the unit purchase process. This latter plan attempts to start earlier and more comprehensively to incorporate a “best practices on steroids” approach to the proj-ect, and the process of design-ing, developing, marketing and selling the units is much more inclusive.

Project Team. When looking at the life cycle of the develop-ment of a condominium com-munity, there are many phases

that require careful planning and management in order to be sure that the project and devel-oper are not being inadvertently “set up” for exposure to litiga-tion claims. The first element that will advance the protection of the developer will be the selection of the qualified proj-ect team, including the legal, survey, design, construction, financing, title and property insurance, peer review, HOA management and accounting talent.

The reputation, experience and successes that can be shown and assured in the process of retaining the project team are meaningful regarding the ability to implement a risk-mitigated development plan. This step and process should not be taken lightly, and best practices would suggest that price alone for these team members should not be the driving determinative; value is the issue, certainly in the context of risk mitigation as well as the success of the result-ing project.

Project Documentation. The structuring, negotiation and execution of appropriate documents for the project also can further mitigate exposure to liability, both in terms of form and substance. Initial contracts that can be subject to a “best practices on steroids” approach that anticipate a condominium regime include: the acquisi-tion contract for the desired property; the title insurance contract; the condominium

regime governing documents (e.g., the declaration and HOA documents and initial budget); the design and construction contracts, specifically including the nature and extent of insur-ance contracts; the financing documentation for the project financing; and the remaining project documentation antici-pated by these main contracts that allows for the initial pur-chase of the property, if not already owned, and the design and construction of the desired project.

Each of these contracts deals with provisions that will impact the allocation of risk and liabil-ity in the property and the proj-ect, and should be structured and negotiated with this alloca-tion firmly in mind. In the dec-laration, for example, provisions addressing mandatory arbitra-tion and related disclosures by the HOA to unit owners prior to initiating any defect claim are relevant in today’s environment.

Project and Unit Financing. The market for financing con-dominium projects and units is narrow and likely more costly where it exists. At both the project and the unit levels, the underwriting of each by lenders has become challenging, again enhanced by the current state of the law regarding construc-tion defects. Careful thought to the allocation of risks among the various players in the proj-ect (borrower, guarantor, build-er, insurance company, lender,

Tim Reilly Legislative

Affairs chair, NAIOP Colorado

James M Mulligan

Real estate partner, Husch Blackwell

LLP, resident in the Denver office

L E G I S L AT I V E

H U S C H B L A C K W E L L L AW C O R N E RV O L U M E 2 , I S S U E 4

2016 legislative session: Reactive, not proactive

Condo development in Colorado: Is it possible?

Please see Condo, Page 6B




D emand for income-producing property comes from both popu-

lation growth and employment growth; both have been very strong in Denver for the past six years. Occupancies and rents drive the earnings of properties and these follow the economic cycle with a lag. Economists are forecasting a continued eco-nomic expansion over the next four years and a continued slow pace similar to the last six years.

Office occupancies hit a bottom in the fourth quarter of 2009 at 85 percent and we expect a cyclical peak of 90 percent in the fourth quarter of 2017, when the market moves into its hyper-supply phase, with occupancies declining to 87 percent by the fourth quarter of 2020. A number of smaller proj-ects are creating the oversupply in the market, with the largest concentration being downtown, where most firms believe they can attract millennials to work.

Industrial warehouse occupan-cies hit a peak of 96 percent in the fourth quarter of 2015 and look like they should settle back to a long-run equilibrium level of 93 percent over the next five years. Light-industrial property occupancies are not expected to peak until the third quarter of 2017 at 98 percent with a very mild hyper-supply phase

through 2020, when occupancies decline a mere 1 per-cent. Demand from the marijuana industry has created a doubling of rents over the past five years and rental rates should continue to be strong.

Retail occu-pancies hit a bottom in the fourth quar-ter of 2009 at 91 percent and are

forecast to peak in the fourth quarter of 2017 at 95 percent. We again expect a mild hyper-supply phase with occupancies declining to 94 percent by the fourth quarter of 2020.

Apartment occupancies hit a peak of 95 percent in the second quarter of 2002, then again in the second quarter of 2008 at 94 percent and again in the second quarter of 2012 at 96.8 percent. Since that time they have bounced near the top of the cycle as 8,000-plus units have been demanded by millen-

nials each year for the past four years.

However, since the third quarter of 2014, the market has moved definitively into the hyper-supply phase of the cycle as supply has outstripped demand over the last three years. Our forecast shows this oversupply to continue until the second quarter of 2018, when occupancies may hit a low point of 93.5 percent. We hope that developers can control their production and allow the

market to stabilize – as demand growth should continue for the next five years at least.

While commercial real estate prices have recovered all their losses from the Great Depression and cap rates are at all-time historic lows, we do not expect this trend to reverse as interest rates continue to also be at historic lows and the 10-year Treasury bond (the benchmark for commercial mortgage rates and the best-followed “risk-free” rate) has now been 2 percent

since the beginning of the year. Real estate cap rates are at large historic spreads of 3 per-cent to 5 percent over 10-year Treasuries – which attracts inves-tors from around the globe. Prices have gotten so high in the major cites of the U.S. that even international investors are now coming to second-tier mar-kets like Denver.

Copies of Mueller’s Real Estate Market Cycle Monitor reports are available upon request.

Glenn R. Mueller,

Ph.D. Professor, Franklin

L. Burns School of Real Estate & Construction Management, University of

Denver, and real estate investment

strategist, Dividend Capital, Denver

E C O N O M I C F O R E C A S TDenver commercial real estate cycle 2016:

Is the market peaking?

etc.), and the affirmed value and makeup of the submitted collateral, will be of enhanced interest to the lenders.

Lenders, in addition to justi-fied market studies, review of provisions in the project docu-mentation and presale require-ments, will be looking for more equity in the project as well as to the balance sheet of the borrower/guarantor/contrac-tor, and the nature and extent of insurance coverage in the face of the risks associated with potential litigation that could tie up the collateral value of the property during the pendency of any litigation. Again, provi-sions in the project documenta-tion and assured preventative activity in the course of the development of the project assist with the mitigation of such risks.

Project Construction/Insurance. In addition to the normal matters to be covered in a contract with the general contractor, the issue of risk allo-cation, normally addressed in conjunction with an insurance policy and with an appropriate peer review program, becomes exacerbated by the construction defect litigation issue. The avail-ability and cost of insurance for condominium projects is a key and challenging issue. Where available and where the cost is manageable in the context of project feasibility, this becomes

a defining issue with regard to the allocation of risk.

In today’s condominium market, various forms of “wrap” insurance are looked to in order to mitigate and shift risk in the appropriate circum-stances. An owner-controlled insurance program is an insur-ance policy held by a property owner during the construction or renovation of a property that is typically designed to cover most all liability and loss arising from the construction project (subject to certain exclusions). A contractor-controlled insur-ance program is similar to an OCIP except that the general contractor or construction man-ager sponsors the insurance program.

Sometimes even a combina-tion of an OCIP and CCIP have been formed on a loss sensitive basis where both owner and general contractor share in the savings or additional cost if loss-es are higher than expected on the primary insurance program, which usually includes work-ers' compensation and general liability. There also has been a developer-controlled insurance program, which may or may not include workers’ compensation but provides general liability, umbrella and excess liability mainly for the protection of construction defect claims.

Also in this context, an advanced and comprehensive “peer review” program that provides another set of eyes on

the major elements of the proj-ect’s process assists with the risk management program that is devised for the project.

Project Marketing. Timely disclosure, including appro-priate disclaimers, and com-munications are paramount to marketing condominium projects to the consuming pub-lic. Assuming a larger project, the Interstate Land Sales Full Disclosure Act and its atten-dant registration or exemption requirements suggest an earlier and more comprehensive con-sideration of the issues that will need to be addressed in the marketing of the project and the contents of all of the adver-tising and marketing materials. This also will apply to the unit purchaser documentation, from the governing documents men-tioned above, the reservation agreement, the unit purchase agreement and the buyer’s handbook through the consum-er selection process, the closing documentation, the owner’s handbook, and inclusive of the post-closing warranty and call-back response program.

State and municipal laws should be reviewed for any sup-plemental or specific require-ments regarding the marketing, sale and ownership of such projects.

HOA Operations & Transition. As with other aspects of the project, the tran-sition of control of the HOA from the developer/declarant

to the third-party consumer/unit owner is important at many levels. If done correctly, both in substance and in pro-cess, this transition is actually a time where the relationship between the developer and the HOA can be an enhanced part-nership rather than adversarial.

Here again, timely disclo-sure, appropriate disclaimers, transparency and communica-tions should guide the process from the very beginning and be anticipated in the design of the governing documents for the project. Proper use of a third-party management agent, for example, in establishing and managing the HOA and its budget, resulting assessments, recordkeeping and audit sensi-tive procedures from the begin-ning allows for third-party veri-fication and assists to mitigate the direct risk to the developer. Involving the consumer/unit owner early can be done with-out losing control where neces-sary for construction, marketing and completion purposes.

Unit Sales, Closings and Warranties. Heeding the con-tinued need for disclosure and communications emphasized in the project marketing section above will assist in the process of contracting and closing on the sale of the units and the attendant risk allocations that are involved. Although state law has limited the ability to contract away the liability for implied warranties of habit-

ability, for example, if all of the disclosures and disclaimers are properly made and acknowl-edged, and a warranty and callback program is instituted from the beginning, then there is ample opportunity to work through issues that may arise regarding claimed or possibly legitimate issues.

The old saying of “an ounce of prevention” applies here, and being sure that a communi-cation program regarding issues and realistic response time with the unit owner, both before and after closing, will be a solid first step to allow mitigation of risk.

Always having the unit buyer sign off all the way through the process regarding such disclosures and callbacks is a necessary first step toward such a plan.

There is no sure bet, but addressing the obvious in a careful and complete manner helps.

Utilizing best practices dur-ing each and every step of the way allows for, if nothing else, an adequate case for a defense against any frivolous or over-stated claim of defect.

This article is space limited and therefore incapable of covering any one or more of the above categories of risk in depth. However, this overview is intended to begin to allow one to understand that levels of risk mitigation are available in these projects, if planned and imple-mented in the proper manner.

CondoContinued from Page 5B



T he outlook for commercial real estate in the Denver market remains positive

as population and employment growth continue to increase the demand for space.

For the year ending Dec. 31, 2015, the state of Colorado ranked second in the U.S. (behind North Dakota) for annual percentage increase in population. The 1.9 per-cent annual increase in population in Colorado was nearly 2.7 times the 0.7 percent national average rate of population increase over the same period. Most of the increase is attributable to net migration into the state.

According to the Bureau of Labor Statistics, employment growth in the Denver metropolitan area between March 2015 and March 2016 exceeded 3 percent for the year, far outpacing the 2.2 percent national average rate of employment growth over the same period for the 326 cities reported by BLS.

For the state of Colorado, the industries reporting the largest per-centage increases in employment are Leisure and Hospitality, 7.8 per-cent increase for the year ending March 2016; Construction, 7.4 per-

cent; Real Estate, 5.9 percent; and Education and Health Services, 3.6 percent.

The Business Research Division of the Leeds School of Business has forecast that Construction, Professional and Business Services, and Education and Health Services will continue to lead the growth in the Colorado economy with 2016 expected rates of growth of 6.4 per-cent, 3.9 percent and 3.5 percent, respectively.

In terms of the number of employees added to the Colorado economy between March 2015 and March 2016, Leisure and Hospitality added 24,200 employees, with 19,300 in Accommodation and Food Services and 4,900 in Arts, Entertainment and Recreation; 11,000 employ-ees added in Education and Health Services; 10,900 employees added in Construction; and 7,700 employees added in Retail Trade. Government, at all level, added 9,200 jobs, while the Mining indus-try lost 6,800 jobs over the same period.

The increases in population drove apartment and retail rents up substantially, while the employment increases put upward pressure on

industrial and office space rents. With cap rates relatively flat over the past year, trans-action prices increased, while transac-tion volumes for income-producing properties decreased sub-stantially.

Real Capital Analytics reports that between March 2015 and March 2016, Denver

apartment prices increased 39 per-cent, from $149,445 per apartment to $207,254. Apartment prices increased 45 percent for garden apartments and 22 percent for mid-/high-rise apartments.

While apartment prices increased dramatically, transaction volume plummeted. Apartment property transaction volume declined by 28 percent for garden apartments and

Thomas G. Thibodeau

Global Real Estate Capital Markets professor and

academic director, University of

Colorado Real Estate Center,

Boulder

E C O N O M I C F O R E C A S TDenver CRE outlook remains positive

Chapter SponsorsAdolfson and Peterson Construction

Baron Properties | Essex Financial Group Brinkmann Constructors

Calcon ConstructionCBRE, Inc.

Chicago Title of Colorado, Inc.Colorado Business Bank

Colorado State Bank & TrustConfluent Development

CoStar Group Inc.Cushman & Wakefield

DPC Development CompanyEide Bailly LLP

First National DenverFirstBank

Forest City Stapleton, Inc.Granite Properties

Haselden ConstructionHines

Kiewit Building GroupKirkpatrick Bank

LBA RealtyLCP Development

Majestic Realty Co.Messner Reeves LLP

Metro Denver Economic Development CorporationMiller Global Properties

MTech MechanicalMurray & Stafford, Inc.

Opus Development Company, L.L.C.

Otten Johnson Robinson Neff + Ragonetti, P.C.Pinnacle Real Estate Advisors, LLC

Prime West CompaniesPrologis

Richey May & Co., LLPRMR Real Estate Services

Swinerton BuildersThe W.W. Reynolds Companies, LLC

Town of Parker Colorado Economic Development Department

Trammell Crow CompanyUS Bank Commercial Real Estate

Wells Fargo BankXcel Energy

University MembersUniversity of Colorado, Leeds School of BusinessUniversity of Denver, Daniels College of Business

Awards of Achievement PatronsMcWhinney / The Dairy Block

United Properties / Inova Dry Creek / Principal Real Estate Investors

Polsinelli PC

Developing Leaders Program SponsorFirst American Title Insurance Company – NCS

Sustaining SponsorsBrownstein Hyatt Farber Schreck, LLP

Transwestern

Rocky Mountain Real Estate ChallengeLand Title Guarantee Company – Major Sponsor

Westminster Station, City of Westminster – Project SponsorOpus Foundation – Scholarship Sponsor

Law Corner SponsorHusch Blackwell LLP

Supporting SponsorsKeyBank Real Estate Capital

The Weitz Company, LLC

Media SponsorColorado Real Estate Journal

NAIOP 2016 Corporate Sponsors

Please see Forecast, Page 15B



MARKET UPDATE & FORECAST

D enver is experiencing an impressive year-over-year run in investment

sales volumes – from record prices per square foot to double- digit billion-dollar totals for the year ($10.3 billion in 2015, according to CBRE Research). While the numbers paint the facts of Denver’s investment sales market, they cannot repre-sent the entire picture.

Investment sales volume, while meaningful, is simply one mani-festation of a palpable change occurring in our market – a switch in the way domestic and international investors perceive Denver. The attraction of our market in investors’ minds has improved significantly in recent years, and it is having a major impact on our commercial real estate market.

One driver of our improved status is Denver’s infrastruc-ture investment, which really is starting to pay dividends. The award-winning redevelopment of Union Station has brought exceptional attention to Denver, and the infill development tak-ing place in Lower Downtown and Union Station has served as

a phenomenal driver of capital into our market. National media coverage of Union Station and, most recently, the Regional Transportation District A Line expansion to the airport has positioned Denver as a hallmark example for other cities across the country to emulate.

Other drivers have been our impressive population and job growth. In May, the U.S. Census Bureau released data showing Denver’s growth rate in 2015 was the No. 1 fastest among the 50 most-populous U.S. cit-ies. Our growth also bumped Denver up in the rankings for the nation’s largest cities, sur-passing Detroit to claim the 21st spot.

Much of our in-migration is attributable to young people – helping Denver earn the title “mecca for millennials” in a recent Money magazine article. Our job growth is equally impressive, having expanded upward of 3.5 percent annu-ally for three consecutive years. Comparatively, the U.S. annual payroll jobs growth rate in 2015 was 2.1 percent. Last year also was the fifth year in a row where

metro Denver added more than 53,000 jobs.

These fac-tors, in addi-tion to our quality of life, educated labor force and relatively affordable housing, are putting Denver on the radar of domestic

institutional and international investors like never before.

I had the honor of working on one of 2015’s most unique Denver investment sales – the sale of the CoBank Center in Greenwood Village to a Korean institutional investor. This transaction marked the first institutional Asian-based capital investment in the Colorado office market and provides a telling sign of Denver’s growing prominence in the international investment world. The current cycle has allowed Denver to further solidify its status as a

top-tier investment target for domestic institutional capital and international capital.

Looking to the future, real estate always operates in cycles, and although economic funda-mentals remain very positive, no one expects it to last forever. However, several factors position Denver’s investment market to fare well in whatever lies ahead.

For example, leverage strate-gies are very different from the last up-cycle, both in Denver and nationally. In 2006 and 2007, the market saw abnormal-ly high loan-to-value ratios and extremely aggressive lending. Today’s market is one in which both equity and debt providers have practiced more discipline, learning from the previous cycle with significantly lower loan-to-value averages. The overall lower leverage of real estate positions landlords with a buf-fer to absorb some economic bumps in the road should they come to fruition.

Also, Denver’s economy is continuing to diversify. While oil and gas remain a large and important part of our industry base, technology, financial ser-

vices, health care, food/bever-age and many other industries are choosing Denver as their home and seeing their busi-nesses prosper. This is aided, in part, by the fact that Denver also is a target market for top talent drawn by a distinct and excep-tional quality of life. As people continue to exercise more free-dom in choosing where they live and work, the demand for Denver will only continue to rise.

Overall, it’s hard to not feel really good about Denver’s investment future. In the last year alone, the Urban Land Institute ranked Denver No. 6 on its annual list of markets to watch, Business Insider ranked Colorado’s economy the third best in the country and Forbes named Denver the nation’s best place for business and careers. Record sales volume figures are great, but being able to show evidence of a real change in how the world perceives our market is what ultimately will have the biggest impact on attracting capital, raising prices and driving investment sales in the years ahead.

S o here we are again, seven years into the lat-est economic expansion

with an average expansion life of 5.4 years since October 1945, and working on transactions with record construction costs, record rental rates, record headcounts and furniture configurations only seen before in our high school cafeteria.

Everyone wants to know when this cycle will end and what signs to look for. Our firm recently hosted our annual State of Real

Estate event and we invite you to review the information presented: https://cushman-wakefield.one-hub.com/d/r8lp/.

For decades, we have seen the direct correlation between job growth and absorption of office space. Technology has not yet dis-rupted this relationship, despite a small percentage of the total inventory of office property that has seen technology redefine the way the space is used. The Colorado marketplace continues to add quality jobs at a pace only

matched by four other states in the country and currently measures an unemploy-ment rate under 3 per-cent.

While these jobs continue to be heavy in the ser-vices industry,

Colorado’s second-fastest grow-ing job-producing category is “goods producing” jobs. No, it’s not all beer and marijuana. We have a diversified array of skilled “makers” that have invaded the high country seeking a business-friendly, progressive environment in which to grow entirely new industries, technologies and busi-ness models. This has given birth to an incredible diversity in office product, from gleaming Class AA traditionalism to creative exam-ples of adaptive re-use that people

from all over the world come to see and imitate.

Denver’s community of place makers is world class and it’s this “supply side” influence, created by the places our city has devel-oped and the infrastructure our voters and taxpayers helped to deliver, that enabled this robust job growth to find its way to the high country. Now we just have to try not to extinguish this flame with unabated increases in the costs to hire and do business in

N early halfway through 2016, Denver’s invest-ment sales market

remains active with strong sales volume across all property types. Continuing on the heels of 2015’s $5.2 billion in sales vol-ume, 2016 already has seen $1.8 billion in investment sales vol-ume (office, retail and industrial transactions over $5 million). Year to date the investment sales market has grown more than 44 percent over the previous year. It is expected that Denver’s total investment sales activity in 2016 will eclipse 2015’s total, as invest-ment sales activity typically is much stronger in the third and fourth quarters than in the first and second quarters.

With more than $2.5 billion in office sales since third-quarter 2015, Denver is proving to be an attractive investment market globally. The largest central business district office sale in the last 12 months is the $65.5 million sale of 303 E. 17th Ave. Broadreach Capital Partners

and Equity West sold the 92 percent-leased, 295,000-square-foot office building located in uptown to Kennedy Wilson.

The largest suburban office transaction thus far in 2016 is the $189 million sale of Panorama Corporate Center in Denver’s southeast market in the first quarter. The 94 percent-leased, 708,649-sf proj-ect was developed in 1996 and was purchased by EverWest Real Estate Partners and Chile-based Independencia; Miller Global Partners was the seller.

Another recent significant office transaction was GEM Realty Capital’s acquisition of Central Park Tower from Franklin Street Properties in January. The 86 percent-leased, 11-story tower is located in the Interlocken Business Park in Broomfield. The property trad-ed for a record-breaking $281 per sf, or $83.5 million.

The strong capital flows into the U.S. real estate market com-bined with limited high-quality

properties available nationally in the top 12 to 15 markets have led to continued cap rate compression for Class AA assets over the last 24 months. Many inves-tors that

typically focus on gateway cities – New York City, San Francisco, Los Angeles, Washington, D.C., Boston and Seattle – continue to be frustrated by the lack of properties available and the tremendous competition for core assets. These investors are turning their sights to cit-ies like Denver; Austin, Texas; Chicago; and Miami for oppor-tunities. As evidence of strong capital flows into Denver and the void of CBD Denver office opportunities, seven suburban

Denver office buildings have been purchased by German, Swiss, Norwegian, Canadian, Mexican and South American investors in the last 12 months.

Large retail sales also have been strong through the first half of the year in the Denver market. Retail investment sales thus far in 2016 have increased more than 166 percent year to date over 2015. A large contributor to 2016’s robust retail transac-tion volume was the sale of Clayton Lane in Cherry Creek North. Invesco Real Estate and Oliver MacMillan purchased the Whole Foods-anchored center from AmCap in January for $169.6 million.

Another recent and significant sale was Starwood’s acquisition of Belmar from GF Properties and Continuum Partners for $293.5 million. Belmar is one of the largest investment sales in suburban Denver’s history. The dynamic mixed-use center in Lakewood contains nearly 875,000 sf of retail with over 280,000 sf of office and 171 apartment units.

Some institutional capital took a slight pause in the first quarter, related to concerns about non-real-estate issues like China, terrorism, potential European recession and an atypical U.S. presidential election.

We expect investment sales velocity to remain quite strong throughout the year and into 2017. Denver will remain a top 10 investment market with CBD office, suburban office near light rail, grocery-anchored retail and high-cube industrial remaining the most sought after by domestic and international investors.

INVESTMENT BROKER OF THE YEAR – INDIVIDUAL

OFF ICE BROKER OF THE YEAR – INDIV IDUAL

INVESTMENT BROKER OF THE YEAR – TEAM

Geoff Baukol Executive vice

president, CBRE Capital Markets,

Denver

Todd M. Wheeler

Vice chairman, Cushman &

Wakefield, Denver

Mike Winn Vice chairman, CBRE, Denver

Tim Richey Vice chairman, CBRE, Denver

Please see Office, Page 11B






T he first quarter of 2016 marked the Denver office market’s 25th consecutive

quarter of positive net absorp-tion. Since the beginning of this expansion run, vacancy has fallen 600 basis points to stabilize at 14 percent, while total net absorption has topped 8.1 mil-lion square feet and rental rates in core submarkets have reached historical highs. Net absorption for first-quarter 2016 totaled 264,055 sf. The Class A sector fared well, with absorption of 339,508 sf, but the Class B sector contracted slightly, with absorp-tion of negative 69,163 sf.

The central business district submarket posted another quarter of solid performance in first-quarter 2016, even as the oil and gas sector continued to downsize by 100,000 sf. The CBD led the market with absorption of 175,213 sf, which equated to 66 percent of the market’s first-quarter total, driven by several significant move-ins. The south-east suburban submarket was challenged last year by corporate downsizings but rebounded in the first quarter, posting the market’s second-strongest perfor-mance with absorption of 61,839 sf.

The Aurora, midtown, north-east and west submarkets logged slight negative absorption, ranging from negative 11,506 sf (west) to negative 8,708 sf (mid-town). The northwest, southeast

and southwest submarkets finished the quarter with positive absorption ranging from 13,623 sf (southeast) to 36,428 sf (northwest).

While average ask-ing rates increased year over year in all submar-kets, rates in

the core CBD and SES submar-kets appreciated 26 percent to 33 percent since the cycle’s low in 2009 and continue to reach record highs.

Denver’s strong economy and market fundamentals have sup-ported a development window for the past several years, spur-ring the return of speculative development. Fourteen projects totaling 2.8 million sf are under construction or renovation. Although most of the projects in the construction pipeline are speculative, developers still are proceeding in a disciplined manner. Current new projects are either heavily preleased, or, if speculative, confined to high-demand, niche markets and transit-oriented development locations.

Looking Forward

We expect lease rates in pre-2000 product in the Skyline and uptown micromarkets to soften by as much as 10 percent due to the lack of veloc-ity in these areas, which have lost ten-ancy to Lower

Downtown over the last several years, and the prevalence of oil and gas sublease space. Oil prices will rebound but not to the levels of $80 to $90 per bar-rel and, while we anticipate oil approaching $60, it will be some time before it gets there. Legal, accounting and financial ser-vices, major CBD employment sectors, are stable.

LoDo and the Central Platte Valley are not going to experi-ence the same challenges as the rest of the CBD. While rates for second-generation space are not expected to appreciate more than 3 to 5 percent, rates for new construction, which will continue to fill up over the next six months, will continue to rise, depending on location.

The rates that are being

achieved this year and beyond in LoDo are the highest the city has ever experienced, breaching $50 on the high end. Rail access will establish or re-establish that a prime location is vital for com-panies’ abili-ties to attract

and retain key personnel for the future. It is critical to accommo-date the increasing millennial population for these major cor-porations.

River North will continue to be an emerging market with the development on the new A line commuter route to Denver International Airport, with some significant leases being signed within the next two months. This activity will give RiNo the trac-tion it needs to establish itself as a submarket that offers a strong option to attract the burgeon-ing tech market that already is migrating there and will have a larger presence in the future. This market will benefit from the new National Western Center and the Interstate 70 expansion as well as the A Line, all of which will change the character of the

neighborhood. Further, several planned new and exciting venues will add to the allure of RiNo.

The SES submarket will see strong activity from small users (under 15,000 sf), but there are a number of available large con-tiguous blocks of space that are intensely competitive with each other. The demand currently is not there for the large corporate user. The majority of the activity will be lateral moves with one space being leased and the for-mer space becoming available, so in essence, trading spaces. Therefore, rates generally will be stagnant and there could be some lease rate wars that tran-spire over the next year for select blocks of space. The only large transactions that will take place are build-to-suit leases at TOD sites and campus (200,000-plus-sf) development.

The Stapleton, Gateway and Denver International Business Center micromarkets will enjoy their share of demand, but there is very little product available. This area has the chance to be the most aggressive, in terms of new construction, of any other market due to low land cost basis. These micromarkets are well located within proximity to the airport and now have rail transit at their doorsteps. There will be speculative development announced in these micromar-kets within the next six to 12 months.

OFF ICE BROKER OF THE YEAR – TEAM

Victor Frandsen

Executive managing director, Newmark Grubb

Knight Frank, Denver

Tim Harrington



Alan Polacsek

Senior managing director, Newmark

Grubb Knight Frank, Denver

http://www.coloradosymphony.org




W ith the lowest vacancy rate in 18 years and more than

353,000 square feet of positive net absorption, the start of 2016 painted a bright picture for Denver’s retail scene. The current vacancy rate is hover-ing around 5.8 percent. While we anticipate the vacancy rate will rise due to the bankruptcy of Sports Authority and some of the office supplier big-box stores, the turnover will cre-ate opportunity for junior box retailers looking to enter the market.

In terms of locations, the retail cores of Cherry Creek and Park Meadows, both with vacancy rates of 1.8 percent, and downtown Denver continue to dominate the headlines, but other sites in Denver are seeing an evolution in retail activity as well.

There is a push for authentic-ity in the areas of River North, the Highlands, South Broadway and the surrounding areas as millennials and Gen X’ers desire social options right out-side their front doors.

Retail brands with an urban edge are being strategic in selecting these locations. For instance, Kit and Ace – a retailer with historic ties to Lululemon – is an example of a retailer that understands the blend of urban grit with lasting street wear and has been a hit not only in RiNo but also in similar nontraditional urban set-tings around the country.

Cherry Creek is gaining a strong identity as a top destina-tion for national luxury brands looking to establish billboard locations. Second Avenue in Cherry Creek is at the epicen-ter of the transformation. The

opening of RH (previous-ly Restoration Hardware), Arc’teryx and Peter Millar represent only the beginning of what is planned. The redevelop-ment of the Sears build-ing into a quality mixed-use develop-

ment will provide more oppor-tunities for the best of national and international concepts.

Looking at retail industries, Denver now is officially a foodie destination with sev-eral expanded chef-driven and local/regional concepts looking for the perfect location. The

fast-casual segment is the hot-test among food retailers with newer-edge concepts striving to round out the demand. In the suburban markets, expect continued expansion of both traditional grocery concepts and alternatives as the trend to healthier living has expanded from Trader Joe’s, Whole Foods and Sprouts to more tradi-tional grocers, including King Soopers.

We also are seeing a trend toward more specialized and experiential retailers. Older concepts from the last decade, such as Sports Authority, are giving way to more specific and well-branded concepts that appeal to an educated customer base. Specialty skiwear, run-ning shoes and yoga wear stores are examples, where shoppers expect a personalized and knowledgeable customer ser-

vice experience. This is a tactic for differentiating an in-store experience from e-commerce options as well. E-commerce is growing in Colorado, but brick and mortar definitely has its place, especially in hand with a well-planned, omni-channel media strategy.

In terms of the remainder of the year, demand for quality retail space remains high. As more than 684,000 sf of new retail space currently under construction delivers, we expect to see the space absorbed quickly. Denver’s tremendous population growth – rising by more than 100,000 people last year, according to the latest U.S. Census Bureau numbers – is continuing to fuel the retail segment’s growth. Overall, we expect to see Denver’s retail scene remain vibrant through-out 2016.

A strong local economy has made metro Denver a leading loca-

tion in which to live, work and do business. Metro Denver is where people of all ages want to live, and the area continues to grow in both attraction and retention.

Population growth equates to housing demand. As the metro area employment base grew and population increased, demand for apartments contin-ued with 10,100 units delivered over the past year. Of these, more than 70 percent were absorbed. Vacancy is nearly drum-tight; all seven coun-ties experienced an average vacancy rate of 5.3 percent for 2015. As the metro area’s

employment base grows, and natural and in-migration popu-lation growth continues to exceed expectations, demand for apartments is expected to remain, keeping vacancy rates low throughout the seven-county area.

During first-quarter 2016, 19,995 apartments were under construction with another 10,991 units planned for delivery through 2019. As of the end of the first quarter, year-over-year absorption was a record 7,327 units. Forecasts for absorption continue to be strong and the lack of condo construction due to construc-tion defect laws will push absorption for apartments to record levels in the next few

years. Record

high single-family home values are making it more difficult for people to buy homes, especially millennials, the largest popula-tion group in metro Denver, add-ing more demand to

the rental market. A recent study from Apartment List states that a college-educated person who is under the age

of 36 with no student debt will need 14.8 years on average to save the 20 percent down pay-ment typically required on a median-priced home in metro Denver, compared with a 5.3-year national average.

Underwriting standards for debt and equity for new con-struction continue to tighten, with equity required for new developments rising from 30 percent to 35 percent. This will focus attention of strong sponsors on sites with transit and/or submarkets with viable underwriting. Demand for well-located infill and transit-oriented development sites remains strong. Land prices will remain stable going for-ward as apartment developers

compete with office, retail and hotel developers.

While a 30,000-unit pipeline in metro Denver could be alarming to some, the strength of the economy, job growth, population growth and the desire to live in Denver – recently ranked the “best place to live in America” by U.S. News and World Report – the demand for apartments should continue to grow and absorb the new units coming on line without much of a change to vacancy.

ARA Executive Managing Director Chris Cowan also was named NAIOP Colorado 2015 Land Broker of the Year.

RETA I L BROKER OF THE YEAR

LAND BROKER OF THE YEAR

Jon Weisiger Senior vice

president, CBRE Retail Services,

Denver

Steve O’Dell Executive

managing director, ARA, A Newmark

Co., Denver

M etro Denver’s eco-nomic fundamen-tals continue to

strengthen and outperform the nation. The seven-county area is a leading location in which to live and work. A number of factors continue to fuel busi-ness expansions, relocations and population growth, includ-ing a strong business climate, a well-educated and skilled work-force, a focus on innovation and research, an investment in infrastructure and transporta-tion, a central location and a highly desirable lifestyle.

Denver is experiencing tre-mendous population growth. Metro Denver had a 17 per-cent population increase from 2004 to 2014. Approximately 70,000 people live in down-town Denver and its city center neighborhood, a 164 percent increase from 2000. Denver’s projected growth rate in the next five years is more than four times the national rate.

Denver recently was ranked No. 1 in the nation for annual appreciation of home values, with a 9.1 percent increase from first-quarter 2006, accord-ing to HSH.com’s Home Price Recovery Index. As home prices in metropolitan Denver continue to rise, many poten-tial homebuyers (millennials and seniors, in particular) are looking at rentals, dramatically impacting rental rates. Rents in metropolitan Denver rose by 7 percent year over year as of first-quarter 2016, approxi-mately 150 percent higher than the national average of 2.8 percent.

Despite high rates, renters in Denver still pay a smaller percentage of their income on housing than renters in other metropolitan cities, especially coastal cities, and Denver’s exceptional quality of life offerings continue to lure workers. Additionally, Denver’s many infrastructure improve-

ments are significantly benefiting the city and attracting companies to relocate to the area, drawn to our highly edu-cated and tal-ented work-force. Diversi-fication of our indus-tries allowed metro

Denver to perform better than the national economy, and the area is expected to expand at a faster-than-average pace for the remainder of 2016 and 2017.

Colorado’s position as an in-migration leader – adding nearly 101,000 people to its population in a single year with 80 percent landing in the Front Range – translates to a continually tight housing mar-

ket, especially in affordable housing. Condomin-ium construc-tion is at a record low. According to Metrostudy, there were 1,674 home starts in the Denver area for the first quarter. Of these, only 18 were condo-

miniums, equating to 1.1 per-cent. In 2015, there were only 59 townhomes and condomini-ums built in downtown Denver, compared with 870 in 2007.

This gap is due, in large part, to Colorado’s construction-defect laws, which continue to be a hot button of conten-tion in the state Legislature. Developers remain cautious of affordable housing develop-

ments because of concerns over potential lawsuits for imperfections, like cracked foundations, leaky windows and other structural problems. Until this issue is addressed, affordable housing in desired locations will remain nearly nonexistent. The apartment market has been a huge ben-eficiary of these laws and will continue to benefit, driving occupancy as well as rental rates higher.

On the investment front, cap rates in Denver remain com-petitive compared to gateway cities. More institutional and national investment managers are drawn to Denver as they chase yield and follow demo-graphic shifts.

Overall, the Denver economy runway remains long, and this will lead to increasing popula-tion growth, job growth and a very tight multifamily market for the future.

MULT I FAMI LY BROKER OF THE YEAR

Shane Ozment

Vice chairman, ARA, A Newmark

Co., Denver

Terrance Hunt

Vice chairman, ARA, A Newmark

Co., Denver






T he Denver industrial market is positioned for continued growth in 2016,

entering the fifth year of expan-sion. With low levels of new space added before and during the recession years, combined with record absorption over the last few years, tenants have been rely-ing on new construction to find suitable space within the current constrained supply. This has posi-tioned the market to start 2016 with historically low vacancy and lease rates continuing to rise past prerecession levels.

New construction was largely preleased throughout 2015, and large blocks of vacant space in existing buildings typically are leased within one or two quarters.

Looking ahead, further expan-sion is forecasted throughout 2016, although at a slightly slower pace, with new deliveries driving growth. Lease rates will begin to level off for new construction after

significant increases the past five years.

In first-quarter 2016, the Denver industrial market posted another consecutive quarter of growth with net absorption of 234,797 square feet. Overall vacancy achieved a record low of 3.4 percent and plummeted 590 basis points from the cycle’s high, posted in 2009.

Without new deliveries provid-ing room to expand for the tight industrial/warehouse sector, the research-and-development/flex sector was the driving force behind industrial market expan-sion, absorbing 199,504 sf in the first quarter. Vacancy for R&D/flex space decreased year over year from 9.7 to 7.4 percent. Absorption in the industrial/warehouse sector was 35,293 sf in the first quarter, hampered by an already historically low vacancy rate of 2.8 percent, largely unchanged year over year from 2.7 percent in first-quarter 2015.

Rental rates continued to increase in the first quarter, but we believe lease rates may be nearing their peak for certain types of assets. The northeast, west and east submarkets have enjoyed the greatest increases in industrial rates since the cycle’s lows at

year-end 2010, posting increases of 85, 60 and 50 percent, respec-tively, while the central, northwest and southeast submarkets logged increases between 30 and 40 per-cent during the same time period. As we enter mid-2016, these rental rate increases are starting

to impact demand; in fact, sticker shock is causing some users to delay decision-making.

Looking ForwardFuture supply will not outpace

demand due to a dearth of devel-opable sites and the fact that a few active developers in the market control most of the remaining par-cels ready for development. Small- to medium-size projects will be constrained due to the high cost of construction. New construction, in general, still is being held in check by high construction costs.

The planned expansions of both Interstate 70 and the National Western Complex will lead to loss of industrial space in the central submarket. With little vacant space available, the displaced tenants of those buildings will either have to move east, where the majority of the new construction is underway, or pay a premium to remain in the central submarket.

Look for activity to pick up in the second half of 2016 with:

• In-demand new projects deliv-ering later this year,

• Continued organic growth and

• Several large users in the mar-ket committing to leases or build-to-suits.

The Denver industrial mar-ket will remain healthy moving forward despite election year uncertainties and concerns about global, national and local econo-mies, which have contributed to a slight slowdown in activity for the first part of this year.

Amazon’s recent commit-ment to Denver is exciting news and just the tip of the iceberg as e-commerce continues to com-mand increased market share. We have a healthy amount of new product, but the market still is not overbuilt, and demand for new product remains strong.

INDUSTR IAL BROKER OF THE YEAR

Mike Wafer, SIOR



our state. From a real estate fundamen-

tals perspective, we have seen relatively good discipline from our office developer community, with only a handful of specula-tive office projects launching out of the ground with or without a tenant commitment. At the same time, a couple of projects were largely preleased long before the

architects even finished dreaming up ways to reimagine the work-place. Existing, large occupiers of office space are choosing to remain and grow in the Colorado even after merger and acquisition deals that historically guaranteed those jobs would flow out of state.

Additionally, we’ve seen in-migration of jobs with occupiers from coastal markets, and that trend is continuing despite sharp-ly higher costs and concerns over

workforce saturation. Ultimately, this expansion cycle will end, like all those before it, but it doesn’t appear it will end anytime soon, and our brokerage profession-als still are pulling 12-hour days scrambling from meeting to meeting trying to cover robust market activity even if not all of that activity is in the traditional form.

One final thought on a trend being amplified by our city’s focus

on infrastructure and amenities that serve the core. Prior genera-tions’ preferences drove a higher level of job growth in periphery or suburban locations in our cit-ies. However, the fastest-growing generation in the workforce, mil-lennials, has turned this decades-old urban planning model on its head, driving significantly higher job growth into the core of our cities. Maybe this will change again if those kids ever have kids,

but maybe it won’t. Denver’s unique in that from a

transit, cultural, entertainment, business, political or almost any other perspective, our city has a fantastic core with a diverse and dynamic product offering for office users. This will continue to promote diversity in industry, use and programmatic elements that may well be our best defense in the next downturn, whenever it comes calling.

OfficeContinued from Page 8B

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by Jill Jamieson-NicholsEditor, Colorado Real Estate Journal

Barry Dorfman is a player-coach who likes to borrow a phrase from friend and former Dallas Cowboys quarterback Roger Staubach: “There aren’t a lot of traffic jams on the extra mile.”

“Always, always do the right thing for your client and go that extra mile for them,” advises Dorfman, market director for JLL’s Rocky Mountain Region and a JLL international director.

According to Dorfman, the secret of success in commer-cial real estate “is there are no secrets. It’s all about working hard, putting in the time and the effort. Business doesn’t come to you. You have to find it and then you have to earn it.”

Having built a nearly 35-year career on that kind of thinking, Dorfman was NAIOP Colorado’s choice to receive the chapter’s inaugural Legacy Broker Award earlier this year. The award recognizes an individual with a high level of achievement and leadership in the industry who is respected by peers for his hon-

esty and ethics. Part of it also is mentoring

and guiding the next genera-tion of industry professionals, something that comes naturally for the former teacher.

“As a special education teach-er, you’d have 15 students at 15 different levels and be teach-ing five different subjects, so you had to do a lot of things at once. I think in real estate, to be successful, you have to be able to do a lot of different things at one time,” said Dorfman, who keeps his hands in brokerage despite running one of the big-ger real estate organizations in Denver.

“I really enjoy working with clients. You establish relation-ships of trust and confidence, and I truly enjoy negotiating creative deals and going the extra mile for our clients, and ultimately creating a great work environment for their busi-nesses and establishing the low-est occupancy cost possible for them,” he said.

Dorfman was 31 when he entered commercial real estate, thanks to the influence of friends like Don Cook of DPC Development Cos. and Frank

Kelley of CBRE Inc.

“You do burn out in special educa-tion,” he said, explaining he was on a sabbatical and working his master’s of business administra-

tion when he got a job with Grubb & Ellis Co. He opened the local office of The Staubach Co. with partner Joe Hollister in 1996, and in 2008 the company merged with JLL.

He’s done deals for, among others, Janus, Xcel Energy, EKS&H, Halliburton, JPMorgan Chase, Visa USA, DirecTV and CoBank, whose new headquar-ters is a NAIOP award-winning development. “I think it was a great headquarters project and a very creative deal structure we put together,” Dorfman said.

Originally from the Bronx, Dorfman, despite his many years in Colorado, hasn’t shed his Northeastern accent. That lends itself to a great imitation of Bernie Sanders because,

although he works hard, he also likes to have fun. One of his office’s annual events is Cinco de Guac, a May 5 guacamole-making contest.

“I enjoy being part of a team and especially a team that embraces a culture of teamwork and collaboration. We have such great people here. I think if I’m good at something, I’m good at recognizing the importance of surrounding yourself with team-mates who have complimentary skills. That enables us to really work together and create and negotiate great real estate deals for our clients.”

Dorfman, 64, has served on numerous nonprofit boards, including Big Brothers Big Sisters. He feels fortunate to be in a position to give back and also to be part of the tightknit Denver commercial real estate community.

“There are so many great peo-ple in this real estate communi-ty,” he said, noting NAIOP pulls together professionals from all aspects of the industry. “I think it’s an organization that cares about doing the right thing for the community.”

Dorfman and his wife, Dana,

met at a broker function and have two grown children, Brian and Abby. Dorfman likes to play golf, travel and, despite knee surgery, continues to ski.

He was “completely hon-ored” to win the Legacy Broker Award “because I think there are so many other people in this real estate community that are every bit, if not more, deserving. You look back on your career, and you feel really proud of what you’ve done – a lot of hard work, a lot of long days, but also being part of a great team and feeling good about creating an environment for a lot of people to be suc-cessful,” he said.

He feels equally gratified to have won NAIOP broker achievement awards a half-doz-en times over his career and is proud of others who have earned those awards.

“I think I get way too much credit, but I’m smart enough to surround myself with good people,” he said, noting there is one other honor that will always be special: the Rookie of the Year award he earned his first full year in commercial real estate brokerage.

by Jennifer Hayes

Editor, Colorado Real Estate Journal

More than a decade ago, Leanne Toler found herself in the shoes of competitors of the NAIOP Real Estate Challenge.

And while the challenge was a case study in Georgia versus a semester-long class in Colorado, the experience left an indelible mark on Toler, so much so that she has been actively involved in Colorado’s Rocky Mountain Real Estate Challenge for the past 10 years. She was recognized for her passion as NAIOP Colorado’s

2015 Member of the Year. “Every year competitors have

said that it is the best experi-ence in their degree program,” said Toler, vice president, pub-lic finance, at Stifel. It is that response that continues to drive Toler to help the challenge serve participants, the universities, the real estate community and NAIOP.

“I grew up in a little town in Ohio and was taught the impor-tance to give back to the com-munity, to give back personally and professionally,” said Toler, who relishes the opportunity to volunteer within the real estate

community, which is her passion.

As for the recognition as Member of the Year, it was a nice surprise.

“I had an inkling some-thing was

up,” Toler confessed, after she received a cryptic phone call that said she might want to postpone an out-of-town meeting to attend the Awards of Achievement event.

“I didn’t know what award I might be presented, but I was very flattered,” said Toler. “It was nice to have my hard work rec-ognized. The NAIOP challenge committee works diligently to fulfill the wants and needs of the real estate community, the wants and needs of the schools and the wants and needs of the students. Our goal with each event is to keep it exciting and fresh.”

In addition to the Rocky Mountain Real Estate Challenge Competition Committee and the Vision Committee, Toler is actively involved in other NAIOP seminars and mentorships.

“NAIOP adds a lot of value to the real estate community. Just think of the void without it,” she commented.

Toler graduated from the University of Southern California with a bachelor’s degree in archi-tecture, fulfilling a dream she had since the seventh grade to be an architect. However, after graduation, she got a job work-ing for an architectural firm in the Vail Valley and came to the realization that if there wasn’t financing behind a project – no matter how cool it was – it couldn’t get built.

N AIOP Colorado’s Sherman R. Miller Trailblazer Award win-

ner has achieved much since entering commercial real estate in 2008, including skipping promotion titles due to an over-whelming production total dur-ing 2015.

Courtney Carnahan Hasson, a Newmark Grubb Knight Frank director who said her success would not have been possible without support of her NGKF team, has transaction experience in multiple major urban and suburban markets with all facets of commercial real estate, from ground-up development to repo-sitioning assets. Her diversified

client base includes real estate investment trusts, institutional, entrepreneurial and operating partners. In the last three years, she has been involved in more than 350 transactions with a combined deal value of $1.5 bil-lion.

Hasson has been responsible for the leasing, sale and reposi-tioning of more than 3 million square feet in the Denver mar-ket and has a current portfolio encompassing 1.4 million sf with seven major clients. In the last 12 months, she and her partner have represented tenants includ-ing AIMCO, Finance of America and OnDeck Capital. She is responsible for drafting options

summaries with hierarchy of needs, pro-viding finan-cial analyses for proposals, negotiating proposals, providing business terms, lease comments, and coordina-tion with the architects and

project managers.Her key transactions included:• Triad at Orchard Station (cli-

ent: M&J Wilkow/Wayzata): a 414,000-sf, Class B project locat-

ed in the southeast suburban submarket. Hasson, along with partner Jamie Gard, repositioned the asset, leasing 260,000 sf and increasing the rental rate $7.50 per RSF in a 16-month period.

• The Lab at 17th and Platte: Hasson worked with Brue Capital and Confluent Development on the development of the project, which received the NAIOP award for Innovative Development of the Year. She and her team devel-oped the branding and market-ing campaign that resulted in the successful sale of the build-ing and secured WeWork as a major tenant.

• 1515 Wynkoop (client: American Realty Advisors): a

307,000-sf, Class A project locat-ed in Denver’s central business district. Hasson and her team leased the asset to 100 percent occupancy at record rates.

• Highland Court (Client: DPC Development Co.): a 93,000-sf suburban, Class B project. Hasson leased 40,000 sf above pro forma rental rates to achieve the building’s highest occupancy rate in more than 10 years.

• Additionally, Hasson leased over 2.5 million sf of Class A and B office projects in Houston, Texas, including Pennzoil Place, a 1.3 million-sf Class A asset in Houston’s CBD. She participated in a team that led to a substantial restack of 460,000 sf.

L E G A C Y B R O K E R O F T H E Y E A R

M E M B E R O F T H E Y E A R

T R A I L B L A Z E R

Player-coach Dorfman goes extra mile for clients

Toler relishes challenge of NAIOP event

Hasson rises to top to claim Trailblazer Award

Barry Dorfman

Leanne Toler

Courtney Carnahan Hasson

Please see Toler, Page 14B





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N AIOP Colorado’s Membership Committee has five major objec-tives to ensure the continued

success and growth of the organization: 1. recruitment of new members, 2. retention of existing members, 3. new member orienta-tion, 4. university outreach and 5. ensuring prospective members and the current mem-bership are educated on the value of the organization.

The Membership Committee seeks dynamic individuals as its members who believe in the benefits of NAIOP and would like to tell other prospective members about

the benefits. The Membership Committee meets monthly to identify and review potential professionals in the real estate industry who would benefit from involvement. At each meet-ing, a member of the committee will either volunteer or will be assigned to new contacts for recruitment.

The Membership Committee also has been organizing events designed to attract younger members for the Developing Leaders Program. Developing Leaders are the future of the organization and there is strong emphasis on having all age groups well represented in the overall membership.

Upon joining NAIOP, we want new members to get the most value from their membership! New members are welcomed and encouraged to join one of the NAIOP committees in order to deepen the relationships they may have started based on an introduction at the quarterly breakfasts or chapter events. In addition, they are encouraged to attend a New Member Orientation.

Under the University Outreach Program, representatives from Membership Committee, together with the Developing Leaders and the Rocky Mountain Real Estate Challenge Committee, travel to area universities to meet with graduate students in the real estate programs for an informal roundtable to discuss various career opportunities in commercial real estate. This suc-cessful program provides an educational opportunity for the students and an initial introduction to the real estate community in Colorado; plus it has resulted in an increase in student and university memberships over the past several years. The added benefit is to further encourage participation in the chapter’s nationally recognized Rocky Mountain Real Estate Challenge.

Finally, to maintain the high level of involvement and the qual-ity of our membership, the committee places continual effort on retention of existing members. In doing so, NAIOP Colorado continues to maintain a strong ranking of 10th in the nation out of 52 chapters.

Reed is a vice president at Jones Lang LaSalle in Denver. He can be reached at 303-260-6515 or [email protected].

N AIOP’s Legislative Affairs

Committee supports the lobbying efforts of NAIOP and works to ensure that members have a seat at the table in the negotia-tion of possible legislation and public policy activity affecting commercial real estate.

The LAC meets monthly through the year and

biweekly during the legislative session to dis-cuss and review state legislation, local activi-ties and ballot initiatives that may be of con-cern to the NAIOP membership. Through its subcommittees, the LAC focuses on issues such as taxation, growth, water, land use,

transportation, economic development, construction defects and affordable housing, formulating policies so that, as specific issues arise, the LAC is prepared to respond and to educate and advise NAIOP’s leadership and members.

Much of the effort to implement the LAC’s policies and positions on behalf of NAIOP is undertaken by Kathie Barstnar as the execu-tive director of NAIOP along with NAIOP’s lobbying firm, Axiom Strategies. These activities are financed through the Common Cents Fund, a voluntary membership contri-bution based on a penny per square foot of property owned or managed and through a political action committee for candidate-specific donations.

Reilly is a director at Fairfield and Woods in Denver. He can be reached at 303-830-2400 or [email protected].

T he Programs Committee is respon-sible for planning

the organization’s quarterly breakfast programs as well as various educational and networking events, such as the Fall Educational Series, the Annual Holiday Party and the Property Tour in the fall.

This committee strives to make each program inter-esting, timely, unique and

informative. The committee is comprised of about 25 dynamic, well-connected and energetic members who meet on a monthly basis to plan a year’s worth of vital topics for our members. Program topics range in content from new developments and focused growth areas within Colorado to legislative and current business issues that impact the real estate industry.

Each individual committee member typically takes the lead in planning one or more events,

together with a selected subcommittee of other members, and can participate as a moderator of his/her event, if desired. The committee also puts much consideration into forming panels of speakers who are leaders in the industry and experts in the various topics so that the programs remain rich in high-quality content and interest. At each monthly meeting, the com-mittee reviews the most recent program and member feedback, which invites discussion by the committee of future program topics, formats and speakers.

Also under the programs umbrella are specif-ic, but separate, subcommittees that are formed to assist in the planning of the chapter’s largest events: the Annual Golf Classic, Rocky Mountain Real Estate Challenge, Annual Property Tour and popular new additions such as the Winter Classic Hockey/Curling and Fight Night, which raise funds to support local charities.

Strand is a shareholder at Polsinelli in Denver. He can be reached at 303-583-8266 or [email protected].

NAIOP 2016 Committees

Mike Strand Chair

MEMBERSHIP

Tyler Reed Chair

LEGISLAT IVE AFFA IRS

PROGRAMS

Tim Reilly Chair

DEVE LOP ING L EADERS

T he NAIOP Developing Leaders

group has enjoyed positive membership growth and dynamic programming in 2016.

The Mentor/Mentee Program was completely over-hauled in 2015 and is carrying this posi-tive momentum into 2016. Applications

for the 2016 class have been submit-ted and our committee is currently working on pairings. The Mentor/

Mentee Program has tailored events including: an inter-view and speaking coach, personality profile testing and review, wine tasting and etiquette coach, and an educational panel about real estate development.

The third annual Skiing with the Icons was held again at Arapahoe Basin

in March with a record 95 attendees, including 14 Icons, and perfect weath-er three years running!

Leadership Breakfasts thus far in 2016 have included Mike Kboudi of Cushman & Wakefield and David Zucker of Zocalo Community Development, with planned breakfasts with Jeff Riggs of Essex Financial/Baron Properties and Tim Schlichting of LCP Development in the works.

A DL Project Tour of the VA Hospital under construction is sched-uled for July 20.

The DL Committee also is helping organize the Winter Curling event, which supports Children’s Hospital Colorado.

Membership and social events (“Deals, Drinks, and Dives”) have included socials at Spangalang

Brewery and Top Golf Membership Matters Event, with more being planned for 2016.

DL subcommittee chairs include: Sam Bell, Membership, Erin Kelly, Mentorship, Brandon Kramer, Programs, and John Daskam, Jex Lawrence and Caitlin Quander, Legislative Affairs.

Nichols is director of accounting at Baron Property Services LLC in Denver. He can be reached at 720-488-2000 or [email protected].

Loveland is a commercial banker with Citywide Banks in Denver. He can be reached at 303-365-3708 or [email protected].

Ian Nichols Chair

Adam Loveland

Vice Chair

Seeking a change of pace and career, Toler moved to London, where she spent five years as a senior project manager with Turner and Townsend Real Estate Consultants dealing with everything on real estate proj-

ects, from unexploded muni-tions to buried Roman roads.

She returned stateside and earned her Master of Business Administration from the Goizueta Business School at Emory University, after which she returned to Colorado.

“I just knew I wanted to return

to Colorado, so in 2002, I did. It was not a good year to come back to Denver, which had a net loss of some 30,000 jobs, but I saw a great future for the city and was confident that I could add value.”

She worked several years as the assistant vice president at U.S.

Bank before accepting an offer to work in acquisitions for The Pauls Corp.

“At Pauls, those were some of the smartest people I’ve ever worked with but a lot of the work wasn’t Denver focused and I wanted to change that,” said Toler, who admits she became

enamored with capital markets and municipal bonds before joining Stifel in January 2012. At Stifel, her focus is on special district financings for real estate projects as well as financings for cities, counties and school dis-

TolerContinued from Page 12B

Please see Member, Page 15B











INVESTMENT | DEVELOPMENT

uproperties.com

The employees of United Properties thank our owners, clients and project partners for a successful first 100 years. We look forward to working together as we continue to evolve,

adapt and lead into the next century.

CELEBRATING A CENTURY

OF SUCCESS

by 52 percent for mid-/high-rise apartments. Denver commercial properties also experi-

enced price increases and decreases in trans-action volume over the same period.

Office property prices increased 14 per-cent, from $159 per square foot to $182 per sf, with suburban office prices increasing 21percent and central business district office prices increasing 7 percent. Transaction vol-ume for office properties fell 74 percent for all office, 69 percent for suburban office and 87 percent for CBD office.

Retail properties experienced a 42 percent increase in per-square-foot prices and a 19 percent decline in transaction volume, while industrial property prices increased 14 per-cent, from $76 to $87 per sf, while transac-tion volume decreased 82 percent.

Real estate supply will catch up to the increase in the demand for space – it always has and it always will. As more supply becomes available, rents will stabilize, and what happens to property values will depend primarily on future cap rates.

Cap rates can be viewed as a spread over yields on 10-year U.S. Treasurys. While the Fed continues to threaten to increase short-

term rates, current capital markets are not expecting much movement in long-term rates (e.g. yields on 10-year U.S. Treasurys).

Current market expectations for future yields on 10-year USTs can be extracted from the current yield curve. As of May 31, 2016, yields on 10-year USTs were 1.84 percent (Figure 1). Without getting into the details, the current implied yield on 10-year USTs one year from now is 2 percent; two years from now 2.13 percent; and five years from now 2.37 percent, only a 52.9 basis-point increase in the yield on 10-year USTs over the next five years!

So the current 7.5 percent cap rate for Denver office properties represents a 566 bps spread over the current yield on 10-year USTs. This is very high by historical stan-dards. Over the 2001-2015 period, the aver-age spread between CBD office cap rates and yields on 10-year USTs nationally was about 340 bps.

As the economy continues to gradually improve over the next few years, the spread between cap rates and yields on 10-year USTs will likely revert to its historical average. With little upward movement in yields on 10-year USTs over the next few years, cap rates are likely to fall slightly.

tricts. “It was a circuitous route to get here,

but if I had to do it again, I would do it the same way. I love what I do. My special-ty is to guide and help developers under-stand and use the tools of TIF financing and metro districts. This financing has many benefits and isn’t understood or used enough.

“It is very satisfying to help projects work,” added Toler. “I believe in metro districts, the long-term value they provide to the people who use and pay for the improvements.”

Toler also is the president of the Colorado Municipal Bond Dealers Association, an executive founding mem-ber of Women in Public Finance and has volunteered at the Gathering Place, tutor-ing women to earn their GED diplomas.

Spanning the globe isn’t limited to Toler’s work. She also enjoys traveling, skiing (she is a snowboarder “convert-ing” back to being a skier) and canyo-neering. She also has climbed Mount Rainer, Mount Kilimanjaro and in Machu Picchu. She also loves spending time with her husband, Brian, and their dog, Lomu.

Forecast

Member

Continued from Page 7B

Continued from Page 14B

http://www.uproperties.com





68West Engineering, Inc.Aero Automatic Sprinkler Company

Alan Colussy Architecture, LLCAlliance Construction Solutions

Alpine Bank Denver RegionAMG National Trust Bank

Amstar Group LLCANB Bank

Anton Collins Mitchell, LLPARA, A Newmark Company

Arvada Economic Development AssociationAsset Preservation, Inc

Associated General Contractors of Colorado (AGC)Atwell, LLC

Aurora Economic Development CouncilAvison Young

Ballard Spahr LLPBank of the West

Baron Property Services LLCBBVA Compass BankBloomfield Capital

Braconier Plumbing & Heating Co., IncBRANDiac Strategies

Brighton Economic Development Corp.Brinkmann ConstructorsBroe Real Estate Group

Brownstein Hyatt Farber Schreck, LLPBrue Capital Partners

Bryan Cave, LLPBryan Construction

Buccaneer Development, Inc.BURKETTDESIGN, Inc.

Carpenter Consulting Group, LLCCastle Keep Developments

Catamount Constructors, Inc.CBRE, Inc.

Centennial Realty Advisors, LLCCentury Communities

CenturyLinkChase Commercial Real EstateChicago Title of Colorado, Inc.

Citron WorkspacesCity and County of Denver, Finance Department

City and County of Denver, North Denver Cornerstone Collaborative

City of FountainCity of Lakewood, Economic Development DivisionCity of Thornton Office of Economic Development

City of WestminsterCitywide Banks

CliftonLarsonAllen LLPColliers International

Colorado Business BankColorado Hardscapes, Inc.

Colorado Housing and Finance AuthorityColorado Real Estate Journal

Colorado State Bank & Trust / BOK Financial Corporation

Colorado State Bank And TrustCommerce Bank

Commonwealth Land Title Insurance CompanyConfluent Development Services, L.L.C.

Connexion Asset Group, LLCConscience Bay CompanyContinuum Partners, LLC

Corum Real Estate Group, Inc.Coventry Development Corporation

Crown West Realty, Inc.CTL I Thompson, Inc.Cushman & Wakefield

CVL ConsultantsD.A. Davidson & Co.Davis & Ceriani, P.C.

Davis Graham & Stubbs LLPDCB Construction Company, Inc.

DCT Industrial Trust, Inc.Deferred Tax Benefits, Inc.

Denver Energy NetworkDenver South Economic Development Partnership

Denver Urban Renewal AuthorityDePaul Real Estate Investment Group, Inc.Dividend Capital Diversified Property Fund

DLR GroupDPC Development Company

Ehrhardt Keefe Steiner & Hottman P.C.Eide Bailly LLP

Equity West Investment PartnersErnst & Young LLP

Essex Financial GroupEtkin Johnson Real Estate Partners

Evergreen Industrial, Ltd.EverWest Real Estate Partners

F&D International, LLCFairfield & Woods, P.C.

Fidelity National Title Insurance CompanyFirst American Title - National Commercial Services

First National DenverFirstBank

Flatirons Surveying and EngineeringFlood and Peterson

Forest City Stapleton, Inc.Forum Real Estate Group

GallowayGeneral Services Administration

GenslerGrandbridge Real Estate Capital

Granite PropertiesGreat Western Bank

Guaranty Bank and Trust CompanyHaselden Construction

Heritage Title Company/Commonwealth Land TitleHFF, LP

Hier & Company, Inc.Hines

HITT Contracting Inc.Holland & Hart LLP

Holland Partner GroupHuitt-Zollars, Inc.

Husch Blackwell, LLPIA Interior Architects

Impact Claim Services LLCIndustrial Property Trust (IPT)

Integrated Properties, Inc.Intergroup Architects, Inc

Intergroup, Inc.International Risk Group

Iron Woman Construction & Environmental ServicesJ.R. Butler, Inc.

JCR CapitalJohn Madden Company

Jones Lang LaSalle Americas, Inc. (JLL)Joseph C. Sansone Company

JP Morgan ChaseJR Engineering

K2 Ventures, LLC Keller Williams Realty

KEW Realty CorporationKeyBank Real Estate Capital

Kimley-HornKirkpatrick Bank

Koelbel & CompanyKutak Rock LLP

L.C. Fulenwider, Inc.Laff Gordon Bennett Logan PCLand Title Guarantee Company

LBA RealtyLCP DevelopmentLee & Associates

Lennar CorporationLewis Roca Rothgerber LLPLincoln Property CompanyLindquist & Vennum LLp

LMI Landscapes, LLCLowe Enterprises Real Estate Group

Majestic Realty Co.Manhard ConsultingMarcus & Millichap

Martin/Martin Consulting EngineersMarx/Okubo Associates.MAVDevelopment West

McGladrey LLPMcWhinney

Merritt Property Group, LLCMessner Reeves LLP

Metro Denver Economic Development CorporationMiller Global Properties

MOA ArchitectureMontegra Capital Resources, LTD

Mountain West Industrial PropertiesMoye White LLP

Mutual of Omaha BankNAI Shames Makovsky

National Valuation Consultants Inc.Neenan Archistruction

Newmark Grubb Knight FrankNewMark Merrill Companies

North American Title CompanyNorthMarq Capital, LLC

Nova Consulting Group, Inc.NV Commercial Incorporated

NV5 - Nolte Vertical FiveOgilvie Properties

OmniTRAXOpus Design Build LLC

Opus Development Company L.L.C.Otten Johnson Robinson Neff + Ragonetti PC

OZ ArchitecturePanattoni Development CompanyPinnacle Real Estate Advisors, LLC

Pless Law Firm, LLCPolsinelli PC

Powers Brown ArchitecturePrime West Companies

Principal Real Estate InvestorsPrologis

Q10 | Capital, LLC.rand* construction corporation

Real Capital SolutionsRelocation Strategies Colorado

RETTEWRevesco Properties

Richey May & Co., LLPRMI Capital ManagementRMR Real Estate Services

RNL DesignRothberger Johnson & Lyons, LLP

Ruschmeyer CorporationRyan Fergason Inc.

Sampson ConstructionSaunders Construction, Inc.Senn Visciano Canges P.C.

Shaw ConstructionSmall Giants, LLC

Snell & Wilmer LLPSpaulding Companies

St. Charles Town Company, LLCSteeleWave LLC

Stewart Title - Denver Commercial DivisionStewart Title Guaranty Company

Stifel Financial Corp.Sunflower Bank N.A.Swinerton Builders

Taylor KohrsTCB AECOM

TCF BankTerrix Financial Corporation

The Beck GroupThe McBroom CompanyThe Pauls Corporation

The Quiat Companies, LLCThe St. Denis Group

The Studio ArchitectureThe Weitz Company, LLC

Town of Parker Economic Development DepartmentTrammell Crow Company

TranswesternTriumph Real Estate Corporation

Turner Construction CompanyU.S. Bank

Unique Properies, LLCUnited Properties

University of Colorado - Leeds School of BusinessUniversity of Denver, Daniels College of Business

US BankVector Property Services, LLC

Vectra Bank ColoradoW.W. Reynolds Companies

Ware MalcombWC Johnson, LLC

Wells Fargo Bank, N.A.Westcore Properties, LLCWestfield Company, Inc.

WGS LimitedWiegmann AssociatesWoodspear Properties

Xcel EnergyZisler Capital Associates

NAIOP Member Companies

Documents

Colorado Chapter Spotlight