1240 W. Bayaud Avenue

1240 W. Bayaud Avenue Denver, CO

Offering Memorandum | 2019

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The Offering A fee simple, unencumbered interest in 1240 W. Bayaud AvenueThe prospective purchaser will be selected by the Seller in consultation with

Avison Young on the basis of purchase price, funding discretion/capability, level of

underwriting, anticipated closing date, experience in closing similar transactions and

other relevant factors determined by the Seller.

Investment ContactsFor additional information, please contact:

Sam Crowe, [email protected]

Jaimee Keene, MAI, Vice [email protected]

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Table of Contents

01 Executive Summary 4

02 Property Overview 6

03 Location Overview 12

04 Market Overview 16

05 Comparables 22

01 Executive Summary

SUBJECT SUBJECT PROPERTYPROPERTY

ALAMEDA AVENUEALAMEDA AVENUE

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01 Executive Summary

The OfferingAvison Young, as exclusive representatives for the Owner, is pleased to present this

offering for the sale of the 100% fee simple interest in 1240 W. Bayaud Avenue (the

“Property”), a 2-story, 9,610 sf single tenant office/flex property located on the west side

of I-25 near the Baker neighborhood.

1240 W. BAYAUD AVENUE, DENVER, CO

Sales Price $4,250,000 $3,350,000

Price/SF $442/sf $348/sf

PRICE REDUCED


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02 Property Overview

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1240 W. BAYAUD AVENUE, DENVER, CO

Total Building Area 9,610 sf

Asset Type Office/Flex

Stories 2 stories; single tenant

Average Floor Plate 4,800 sf

Year Built 2010

Class Class B

Parking 12 surface spaces

Land Area 0.55 acres

County Denver

Loading One roll up door

Walk Score Very Walkable (55)

Transit Score Good (59)

Zoning I-B General Industrial District

BillboardsUO-2 Overlay District permits bill-boards

This district is intended to be an employment area containing industrial uses that are generally more intensive than uses permitted in the I-A zone district. The overall purpose of the district is to promote industrial development and economic activity. No new residential uses may be established in the I-B zone district in order to promote and continue a stable employment base for the city.

Property Summary1240 W. Bayaud Avenue is a 9,610 square foot office building directly west of Interstate

25 in the developing Baker neighborhood of Denver. Constructed in 2010, the class B

office asset offers lofted common areas, a rooftop garden and a flex component with

roughly 750 sf of storage space and a drive-in door. The site enjoys immediate adjacency

to Valverde Park and open green space along the South Platte River Valley.

The immediate access provided by Alameda and Interstate 25 in conjunction with the

flexibility of General Industrial District zoning will be coveted by users in several industries.

• Great access to I-25 and Alameda Avenue

• General Industrial District Zoning

• Contemporary office build-out

• Overhead door to storage space

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Site Plan

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Floorplans | 1st Floor

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Floorplans | 2nd Floor

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Floorplans | Roof

03 Location Overview

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03 Location Overview

Office/Flex Location OverviewThe West submarket is comprised of over 8.5 million square feet (msf ) of office space spread over 139 buildings, with

58 flex buildings totaling an additional 3.0 msf. The submarket is bordered by Interstate 25 to the East and the Rocky

Mountain Foothills to the West, encompassing Wheat Ridge, Applewood, Golden and the part of North Lakewood.

Class B properties make up the majority of space in the submarket. Major industries include agriculture/mining,

mechanical and bioengineering, government, computers/data processing, and healthcare. Some of the area’s

largest employers include the City & County of Denver, Enserca Engineering, Peak Power Engineering, Gambro, New

West Physicians, Kinder Morgan Foundation, FirstBank, Terumo BCT Inc., and Tallgrass Energy Partners.

Year-to-date, the West submarket-at-large has recorded 44,784 square feet (sf ) of net absorption, with flex space

recording 9,608 sf of net absorption. Both office and flex space have recorded positive annual absorption since

2015, and with 93,353 sf of office leasing activity and 22,616 sf of flex leasing activity in the third quarter, absorption

will likely continue to trend positive through the end of 2019. As the of the end of the third quarter, there were

no new office buildings under construction in the West, where developers have taken a conservative approach

compared to more bullish construction pipelines in high-density submarkets like the Central Business District and

the Southeast.

Office vacancy in the West submarket has been steadily decreasing since peaking at 18.1% in 2013 as a result of

new product oversaturating the market. In the third quarter of 2019, the vacancy rate in the West was 10.4%, down

thirty basis points (bps) year-over-year (YOY). Flex vacancy has been on a downward trend since the fourth quarter

of 2017, ending the third quarter of 2019 at 2.0%. This represented a 30-bps decline from the second quarter, which

ended with a total of 2.3% flex vacancy. Flex vacancy has remained below 5% since the first quarter of 2018, with

indications this number may continue to drop as 2019 draws to a close.

As with elsewhere in the market, office rents in the West submarket have been on a steady incline since the

recovery cycle began, growing an average 5.5% annually from 2012-2019. As of the third quarter, the average rental

rate was $23.79 FSG, up 3.8% YOY. Given the smaller building set, flex rent has seen a modest amount of fluctuation

over the last several years. However, the average rental rate has remained steady at $22.94 FSG over the last six

consecutive quarters, suggesting flex rents have found stability and will continue to maintain in the $22.00 range.

With absorption remaining positive through the third quarter and vacancy dropping YOY, the West submarket is

poised to thrive through the end of 2019, with flex space offering an opportunity for further growth given the

increasingly tight supply and healthy leasing activity.

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CHERRY CREEK NORTH CHERRY CREEK NORTH SHOPPING CENTERSHOPPING CENTER

WASHINGTON WASHINGTON PARKPARK

DENVER COUNTRY DENVER COUNTRY GOLF CLUBGOLF CLUBBROADWAY RETAIL BROADWAY RETAIL

CORRIDORCORRIDOR

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Broadway Corridor Location OverviewThe south Broadway commercial corridor, extending from Speer Boulevard south to

Interstate 25, has undergone tremendous redevelopment since 2000. The opening of

the Light Rail stops at Interstate 25 and Alameda improved accessibility to the bars,

restaurants and retail along Broadway. In the past 18 years 153,000 sf of new retail

space was added to the area, and it is 99% occupied. Retail has performed well along

Broadway, at a time when brick and mortar operators are facing increasing pressure

from e-commerce. Colorado’s craft spirit industry has also been successful on or near

Broadway. Stranahan’s Colorado Whiskey distillery is now a local landmark along

Interstate 25 and the industrial area between Broadway and Interstate 25 is home to

several other craft producers. Branded Oak Brewing Club, Baere Brewing Company and

TRVE Brewing Company are all operating along the northern stretch of Broadway, before

Speer Boulevard, complementing the new bars and restaurants.

Renovations and adaptive reuse have also brought new life to underutilized space. One

of the biggest projects occurred in 2012 at 65 Broadway. Punchbowl Social, a restaurant

and entertainment complex, was installed in a dilapidated retail building, utilizing 27,000

sf of renovated space. The Denver Health Administration just opened its new 300,000

sf facility near Speer Boulevard and Broadway. Office space along Broadway is in high

demand, as employers seek locations that afford their workers convenient accessibility

and options for dining and entertainment. The nearly 2.2 msf of office space is 95.5%

leased.

The Broadway corridor is a vibrant area, with a diverse array of businesses. Its proximity

to downtown and multiple transportation access points contribute to its resurgence as

a commercial area.

04 Market Overview

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04 Market Overview

Denver Office Market Overview

28,600 Net Employment Increase

in the last 12 months ending in August, up 1.4%

from August 2018.

2.7% Unemployment in Denver, 100 basis points below the national average of 3.7% and down 50

basis points year-over-year.

2,208,698Square feet now under construction, with 33%

pre-leased.

10.2% The Denver office vacancy rate, down 30 basis points from first quarter of 2019.Q

uick

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One quarter after reporting that The Federal Reserve had decided to keep interest rates at 2.5%, the Fed voted to cut rates in July of 2019, perhaps foretelling an economic slowdown after an unprecedented period of growth.

This being said, the office sector in Denver shows no signs of slowing down in either demand for space or investment volume. Economic stability and population growth have contributed to healthy job growth in the professional and health services sectors, driving up the demand for office space. The office sector has seen over $2.5 billion in sales in the last twelve months, aided in part by a growing number of foreign companies interested in investing in the Denver market.

Vacancy & Availability Vacancy remained fairly flat in the third quarter, rising only ten basis points (bps) to end the quarter at 10.2%. This remained true across both class A and B product, with class A climbing 20 bps to 9.7% and class B falling 10 bps to 11.2%. The Hub, a 279,317 square foot (sf ) class A building in RiNo, was fully leased just five months after being

delivered. Tech company EverCommerce and its subsidiary PaySimple leased the remaining 50,125 sf in the building with an expected move-in date sometime in the first quarter of 2020, joining HomeAdvisor and WeWork in the building. Undaunted by recent critical scrutiny over their financials, Wework continues to ink large deals, including a 41,160 sf lease at 1660 Lincoln Street in the CBD that is due to commence in the first quarter of next year. Also in the CBD, Ibotta has signed a lease at 1801 California Street for an additional 31,385 sf with plans to take occupancy in the second quarter of 2020.

Asking RatesThe average gross rental rate rose in the third quarter, up to $25.57 per square foot (psf ). However, this figure still represents a slight contraction compared to 2018, suggesting that rent growth has likely crested its peak. While new construction of class A product in the CBD, Lodo, and the Platte Valley—which includes RiNo—will likely continue to push the upper threshold of rental rates, another sustained period of rental growth is unlikely at this point in the cycle.

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Capital MarketsFollowing a second quarter in which metro Denver office sales reached $480 million—the highest quarterly volume since 2014—the third quarter recorded $585 million in trades across the Denver market at-large. Financial House, a 75,000 sf class A new build in Cherry Creek, sold for $55 million ($733 psf ), just shy of the record set by the sale of 1601 Wewatta Street for $222 million ($742 psf ) in 2018.

Also of note was TerraCap Management’s purchase of two buildings totaling 381,466 sf for $71.7 million. The buildings, located at 7800 and 7900 E. Union Avenue in the Denver Tech Center (DTC), previously sold for $41.7 million in 2016. Though the Southeast submarket has seen a fair amount of negative absorption the last several years as some companies seek space closer to the city center, the sale of the Denver Corporate Center Buildings II and III speaks to the value investors still see in the DTC micromarket, especially as population growth and comparatively lower rents continue to attract tech companies to relocate to Denver from the West Coast.

With rising construction costs and declining long-term interest rates, the debt refinancing volume has begun to pick up as investors look to recapitalize their equity.

Absorption & DemandFollowing a sluggish second quarter, the third quarter ended with 375,899 sf of net absorption. After several

consecutive quarters of negative absorption, the Southeast submarket recorded

significant move-in activity in the third quarter. 5299 DTC Boulevard had 28,476 sf of net absorption spread over four new leases, and 50

FIFTY DTC, located at 5050 Syracuse Street, had 32,790 sf of net absorption,

including 25,517 sf to Fios Capital and 15,286 sf to Pacific Western Bank, who also leased 5,320 sf of retail space on the first floor. Activity remained healthy in the CBD as well, including a substantial renewal by Service Source and 2U, Inc.’s expansion—both at 707 17th Street—for 49,920 sf and 26,557 sf, respectively. With several tech companies announcing relocations to or expansions in Denver in the next year, demand looks poised to remain steady for the foreseeable future.

Construction & DeliveriesConstruction completions in the third quarter were fairly light, with only three buildings totaling 218,950 sf being delivered. This included the 60,000 sf Buell Public Media Center in the CBD and the 88,950 sf North Wynkoop in RiNo, which delivered fully vacant. 260 North, a 70,000 sf

building located at 260 N. Josephine Street, delivered 87.5% leased.

There were no new projects to break ground, though construction continues on several notable buildings across the market. This includes the 595,000 sf Block 162 at 675 15th Street as well as Platte 15, a 156,915 sf class A building located at 2375 15th Street. In the Southeast, the 384,712 sf transit-oriented office tower at 6900 Layton Avenue is 49% pre-leased and due to deliver in September of 2021. Rising construction costs brought on by labor scarcity and increases in land values may explain why there is not more in the development pipeline, especially considering the continuous demand for new class A space, particularly in the CBD, LoDo, and the Platte Valley.

2.2 msfUNDER

CONSTRUCTION

$585MILLION IN TOTAL

SALES VOLUME

10.2%VACANCY RATE

Denver Office Market Overview

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5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

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13.0%

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$10.00

$12.00

$14.00

$16.00

$18.00

$20.00

$22.00

$24.00

$26.00

$28.00

$30.00

2012 2013 2014 2015 2016 2017 2018 2019YTD

Vacancy Ra

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Rental Rate

Rent Vacancy

Historical Vacancy & Rent

5.0%

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9.0%

10.0%

11.0%

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2012 2013 2014 2015 2016 2017 2018 2019YTD

Vacancy Ra

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Absorption Deliveries Vacancy

Absorption & Deliveries

3Q19 Market Stats

Submarket # of Buildings Inventory sf Vacant sf Vacancy % YTD Net

AbsorptionYTD Leasing Activity (sf)

Delivered YTD

Under Construction

Total Office Pre-Leased

(sf)

Average Asking

Rent

Aurora 76 5,554,542 470,701 8.5% (28,095) 117,457 - - - $20.82

Broomfield 47 5,998,841 303,192 5.1% 109,443 199,738 159,000 38,500 38,500 $27.32

CBD/LoDo/Platte Valley 213 36,672,275 3,829,572 10.4% 649,784 2,260,652 540,078 1,404,555 476,637 $34.95

Colorado Blvd./Glendale 122 10,570,774 1,096,963 10.4% 233,660 612,878 151,000 62,995 - $27.80

Midtown 73 4,181,497 318,600 7.6% 36,503 176,049 146,805 - - $29.09

North 31 2,385,445 211,363 8.9% (11,634) 40,358 - - - $23.16

Northeast 37 2,960,913 138,783 4.7% 61,687 60,683 - - - $22.25

Northwest 74 4,068,417 578,266 14.2% (6,102) 198,747 - 57,433 26,322 $24.89

Parker/Castle Rock 17 775,539 15,157 2.0% 1,184 20,427 48,245 - - $28.07

Southeast 401 40,346,128 4,617,764 11.4% 31,455 2,154,678 0 645,215 197,795 $25.26

Southwest 102 6,133,369 576,296 9.4% 57,039 256,098 - - - $19.44

West 138 8,513,458 883,105 10.4% 44,784 247,534 - - - $23.79

Total 1,331 128,161,198 13,039,762 10.2% 1,179,708 6,345,299 1,045,128 2,208,698 739,254 $25.57

3Q19 Building Deliveries

260 North (70,000 sf ) Cherry Creek

Buell Public Media Center (60,000 sf) CBD

North Wynkoop (88,950 sf) Platte Valley

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• As the oil and gas industry works to contend with lower crude oil prices and mounting scrutiny, Whiting Petroleum Corporation announced in August that it planned to slash its Denver workforce by almost 100 people. As the pressure on the nonrenewable energy sector grows, do not be surprised if more personnel cuts lead to reduced real estate footprints for oil and gas companies.

• The influx of tech companies continues in Denver, creating increased demand in the office sector. In August, financial tech firm Personal Capital moved into a new space at 1099 Lincoln Street, with room for up to 30% workforce growth as they continue to acquire new talent across all roles. Similarly, cloud-based data company Snowfake announced in September the plan to grow their Denver presence—currently 80 employees—to 300 by the end of 2020.

• Wework’s IPO filings have sparked critical debate about the risks the coworking model presents. While coworking firms have argued that tech has changed the workplace in such a way that demand for flexible space will remain high even in a downturn, others have argued that the coworking model’s reliance on subleases to generate income creates additional risk. With coworking firms absorbing millions of square feet in Denver and a possible downturn looming, it remains to be seen whether the model has staying power.

Tren

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Wat

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05 Comparables

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05 Comparables

Sales ComparablesPROPERTY SALE

DATESIZE(SF) OCC. YOC SALE

PRICESALE

PRICE/SF BUYER COMMENTS

1 4001-4015 Fox Street Denver, CO 80216 April 2018 8,600 100% 1967 $2,686,500 $312.38 Archbrook

Capital Class B Office. Renovated in 2008.

2 2734 Walnut St May 2019 15,723 0% 1963 $5,970,000 $379.70

"2734 Walnut Investors LLC |

Formativ (Golub &

Company)"

Buyer (Formativ) plans to occupy a portion of the building, moving their Denver office headquarters to this RiNo location. Remaining space will be leased by The Riveter (coworking offices).

3 2806-2820 N Speer Blvd. Denver, CO 80211

September 2017 11,899 100% 1943 $3,700,000 $310.95 VHS Enterprises Class C Office. Renovated in 2015.

4 710 W Colfax Ave March 2019 11,250 100%1970, Renov 2007

$4,200,000 $373.33 City & County of Denver

Owner/user seller will lease-back the property short term. City and County of Denver was the buyer as an owner/user and also acquired the adjacent lot at 700 W Colfax Ave.

5 1563 Gaylord Street Denver, CO 80206 August 2018 8,181 100% 1915 $2,475,000 $302.53 The Other Side

Academy

1915 mansion retrofitted for professional tenants. The building is air-conditioned and features common conference rooms and kitchen, off-street parking and excellent visibility.

6 616 E. Speer Boulevard Denver, CO 80203 May 2017 10,728 100% 1989 $3,400,000 $316.93

AKBD4, LLC (Richard and

Judy Anderson)Class B Office. Renovated in 2008.

7 1040 S. Gaylord Street Denver, CO 80209 April 2017 7,701 100% 1965 $2,900,000 $376.57 Grant Real

Estate, LLC Class B office.

8 2030 S. Cherokee Street Denver, CO 80223 March 2018 7,968 100% 1964 $2,500,000 $313.76 Rees F. Davis

Class B Industrial/Warehouse. Sale/Leaseback by Declaration Brewing Company with a 25 year lease.

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Sales Comparables Map

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1 1240 W Bayaud Ave Denver, CO 80223

1 4001-4015 Fox Street Denver, CO 80216

2 2734 Walnut Street Denver, CO, 80205

3 2806-2820 N Speer Blvd.Denver, CO 80211

4 710 W Colfax Ave Denver, Co 80204

5 1563 Gaylord Street Denver, CO 80206

6 616 E. Speer Boulevard Denver, CO 80203

6 1040 S. Gaylord Street Denver, CO 80209

2030 S. Cherokee St. Denver, CO 80223

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Lease Comparables

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Rent: $20-21/sf NNN Occ. Rate: 0%

X Great location X Impressive views of downtown X Flex building

X Minimal parking X Outdated interior and exterior

PROS

CONS

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Rent: $20.50/sf NNN Occ. Rate: 87%

X Immediate proximity to RTD Light Rail

X Highway signage X Covered parking available

X Common space in need of updates

X Extensive traffic issues during typical rush hour times

PROS

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X Immediate proximity to RTD Light Rail

X Highway signage X Historic building

X Common space in need of updates

X Extensive traffic issues during typical rush hour times

PROS

CONS

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X Proximity to I-25 & Alameda Ave. X Updated X Rare opportunity X Views

X Low parking ratio for office X Site work needed for additional parking

PROS

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X Low rental rates X Ample Parking X New roof

X Outdated building X Low transit score

PROS

CONS

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Rent: $21-22/sf NNN Occ. Rate: 72%

X Renovated X Walkable neighborhood X Surrounded by amenities

X Minimal parking X Low transit score

PROS

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Rent: $28.50/sf FS Occ. Rate: 80%

X New building X Full service lease X In-house ownership

X Difficult access X Only small spaces available

PROS

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X Flex building X High ceilings X Provides signage

X Extremely outdated X Minimal parking available

PROS

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Lease Comparables Map

Address City Property Type Property Size Space Avail Rent/SF/Yr

Class C Office 12,292 SF 12,292 SF $22.00-$24.001240 W Bayaud Ave Denver1

Class B Flex 5,641 SF 5,641 SF $20.00-$21.002727 W 2nd Ave Denver2

Class A Office 148,443 SF 9,303 SF $19.50-$20.50990 S Broadway Denver3

Class A Office 159,371 SF 8,726 SF Withheld900 S Broadway Denver4

Class B Flex 6,624 SF 6,624 SF Withheld495 W Cedar Ave Denver5

Class C Office/Loft/CreativeSpace

13,730 SF 3,850 SF $21.00-$22.00201 Broadway Denver6

Class B Office/Loft/CreativeSpace

8,800 SF 0 SF -400 Santa Fe Dr Denver7

Class B Flex/Light Distribution 8,000 SF 8,000 SF Withheld137 S Lincoln St Denver8

Only properties with valid lat/lon display on map

Copyrighted report licensed to Avison Young - 380277.10/31/2018

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1240 W. Bayaud Avenue Denver, CO

For more information please contact:

Jaimee Keene, MAI, Vice President 303.390.0963 [email protected]

Sam Crowe, Associate 303.390.0957 [email protected]

©2019 Avison Young - Northern California, LTD. - Denver Office. All rights reserved.

1801 California Street | Suite 3750 | Denver, CO 80202

avisonyoung.com

1240 W. Bayaud Avenue

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