The owner of Tuff Shed has bought two office buildings with a combined 373,900 square feet in southeast Denver for $62 per square foot, after the seller had trouble refinancing.
Tom Saurey, founder and CEO of the locally based maker of wooden storage sheds and garages, paid $23 million for Centerpoint I at 3900 East Mexico Avenue and Centerpoint II at 1777 South Harrison Street, just north of the 25 Freeway, the Denver Business Journal reported.
The seller was TerraCap Management, based in Florida, which bought the 14- and 16-story towers in 2019 for $77.5 million, or $207 per square foot.
Tuff Shed takes up the largest offices in both buildings, which have served as its headquarters since 1994. Saurey said the deal was too good to pass up, according to the Business Journal.
The sale to Saurey was brokered by Tributary Real Estate. Andy Cullen, partner and managing broker of Tributary, said the deal started as a lease exploration.
The acquisition follows a growing trend of owner-user purchases in the commercial market, but the size of the deal makes it “pretty rare,” Cullen told the newspaper.
“Most of these buildings have been out of reach, from an economic perspective, for individuals to buy these …. types of assets, until the markets shift,” Cullen said, noting companies are buying properties they occupy to “control their destiny” and stabilize their rent streams from buildings they own.
TerraCap Management ran into trouble trying to refinance the buildings after their values plunged in the past five years, Cullen said. The properties, built in the early 1980s, will be managed by Dunton Commercial.
The buildings, which are 70 percent leased, have had good cash flow and leasing activity, Nate Melchior, principal of Dunton, told the Business Journal. Its tenants include Zivaro, Smashburger, LawBank and Senter Goldfarb & Rice, a law firm.
“The valuation commentary, I think, can be attributed to what’s happening in the office capital markets — lack of equity, lack of lenders, questions around long-term viability and office market — and so I think it’s more of a statement around capital, both equity and debt, but the buildings are not in distress operationally,” Melchior told the newspaper.
Tuff Shed, which relocated to Denver five years after its 1986 founding in Rexburg, Idaho, occupies 29,000 square feet in Centerpoint I, which include an indoor showroom and sales center on the first floor and two floors of offices, plus some offices at Centerpoint II.
Saurey has owned commercial buildings for more than three decades, he said in an email to the paper, saying the opportunity to purchase the buildings was too good to pass up. He said he plans to revamp the buildings’ common areas and fitness center.
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“We’re still finalizing those plans, but having been in this building for 30 years, we have some good ideas for upgrades that will make the buildings more attractive for tenants,” Saurey told the Business Journal.
Tuff Shed has 59 U.S. production facilities and 187 storefronts. It’s also an installation partner for The Home Depot, where they offer an exclusive line of building products in 48 states.
— Dana Bartholomew