Panel discusses real estate investments
Last Updated: 20:01 November 25, 2013
Boulder is relatively unique across the country as a "supply-constrained" real estate market with continued strong fundamentals, said Ned Carner, vice president of investment at Unico Properties LLC, which is based in Seattle. In addition, vacancy rates in downtown Boulder remain low, making commercial real estate attractive, said Becky Gamble, chief executive officer of Dean Callan & Co. Inc. Regional constraints on building also have kept existing properties performing well, said Lynda Gibbons, president and managing broker of Gibbons-White Inc. in Boulder.
The three brokers spoke on The Art of Investment panel Thursday held as part of the Boulder Valley Real Estate Conference and Forecast at the Stadium Club on the University of Colorado at Boulder.
Because properties in the region typically sell for $10 million or less, most larger institutional investors aren't interested, another interesting wrinkle in the regional market, Carner said. Unico recently has invested in several properties in the Boulder market, including 1738 Pearl St. just east of the Pearl Street Mall.
"It's a very strong market, and a different market," Carner said about the Boulder commercial real estate market. "I hear people say Boulder is 10 square miles surrounded by reality, and from a real estate perspective, that holds true as well."
But because commercial real estate here is such a great investment, potential investors trying to get into the market need to be patient, Gibbons said. About 50 percent of the real estate transactions Gibbons is involved in are never formally listed for sale, she said. Potential investors should be ready and willing to pay 45 to 55 percent of a property price to get their foot in the door, Gibbons said.
"Be exceedingly patient and get your money put together. It takes a long time to get an asset (in Boulder)," Gibbons said.
One commercial real estate trend - office properties sold under a condominium structure are very popular among business owner-users, Gibbons said. There's also a lot of owner-user activity in the marijuana industry, since many landlords won't lease property to marijuana companies, Gamble said. About 50 percent of business owner-users buy property with the help of federal Small Business Administration loans, which offer favorable interest rates.
Potential investors can expect an average return on investment ranging from 4.5 to 6.5 percent in downtown Boulder and from 7 percent to 10 percent in business parks to the east, Gibbons said. Carner suggested that investors could expect up to a 30 to 40 percent return on investment if they're willing to take on high-risk properties.
"I want to invest with you at 30 percent," Gamble said to Carner, drawing a laugh from the crowd. She suggested that most properties see a return of 5.5 percent to 8.5 percent these days.
Potential investors can dip a toe into the commercial real estate waters by forming a limited liability company, something that's possible to do online, said Marc Painter, a partner at Holland & Hart law firm, based in Denver with offices in Boulder. A real estate attorney can help them with the finer points of title review and other legal details, Painter said.
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