Franklin Street Properties Buys Office Towers

That equates to about $220 per sf, setting a new record for a suburban office property. Only the Janus building in the more urban submarket of Cherry Creek North, at $360 per sf, has sold for a higher price on a per sf basis in the Denver area. The CB Richard Ellis investment team of Mary Sullivan, Ron Urgitus and Tim Swan handled both the Janus building and the Franklin purchase.

With this purchase, Franklin Street Properties owns two class-A buildings in different parts of the metro area. In 2003, it paid $38 million for the 380 Interlocken building in the Interlocken Business Park in Broomfield, along the northwest corridor between Denver and Boulder. Sullivan, Urgitus and Swan also handled that transaction.

Jeff Carter, director of acquisitions for Franklin Street, says he likes the Greenwood Plaza building for its location near Interstate 25, proximity to a new light rail line, the quality of construction and the view for the property. "It's just a terrific location," he says.

Franklin is not publicly traded and owns a diverse portfolio of mostly office buildings, he tells GlobeSt.com. "We tend to be long-term owners," he tells GlobeSt.com. "We can own a building for 10 years-plus."

Franklin, a private real estate investment trust, used its credit line to buy the Greenwood properties, but likely will replace that with cash. "Wehave almost no long-term debt on our properties," he tells GlobeSt.com. "We bought 380 Interlocken with cash, for example."

As a cash buyer, rising interest rates "are of less importance to us," than more buyers who use leverage, he tells GlobeSt.com. "But the compression in cap rates has made my life pretty difficult. It just affects us differently."

The problem is when cash buyers are competing against buyers who are using leverage, the yield expectations go up. That changes the rate of return investors are willing to accept.

Carter says Franklin is looking for other properties in the Denver area, as well as Colorado Springs. "We've got an office-flex building in Colorado Springs, and we would do more down there if we find the right deal," he says. "We'd also look at Downtown Denver, Cherry Creek and other suburbs. We're bullish on different parts of the city."