$125M SKB Fund Closes First Acquisition

The office park covers 9.53 acres at 7808 Cherry Creek S. Drive, about 25 miles southwest of Denver International Airport. It was developed between 1984 and 1996 and is 93% leased to 29 tenants.

SKB sees potential revenue growth at the park as leases expire because in-place rents are approximately 10% below estimated market rates, according to Todd Gooding, principal and chief investment officer of SKB. "On the back end, the property can be sold as one investment, or buildings can be subdivided and sold as separate investments," Gooding says.

The sale of the office park, brokered by David Danick of Grubb & Ellis Co., translates to $105 per sf and an 8.11% cap rate on the projected first year net operating income. SKB plans to hold the property for between six and eight years, expecting a first-year cash-on-cash return of 7% and a projected IRR of 16.4% to 17.8%.

SKB has several additional acquisitions in the pipeline, according to principal Bob Scanlan, who says the company continues to target "assets in 'A' locations that have B-class improvements" in order to reposition them to meet its criteria for return on investment. SKB officials are declining comment on the status of the fund, but a local industry source says that about a third to a half of the fund's total equity was committed by the time of a first closing this month.

The source says that a second closing is scheduled for early September. Of the total equity expected, about $75 million is expected to come from new and existing high-net-worth clients of SKB while a total of $50 million is expected to come from institutions.

The fund will provide 65% of the equity required for an acquisition while the remainder will come from existing SKB clients investing independently of the fund, taking the company's total expected equity investment to $192 million. With 70% leverage, the company expects to acquire about $650 million worth of office, retail and industrial real estate over two years.