April 19, 2016
Clayton Lane Lands 1st Class Developer
Denver Real Estate Journal
San Diego-based OliverMcMillan made a big splash when it recently paid almost $170 million for Clayton Lane, the western gateway to Cherry Creek. OliverMcMillan, which purchased the 5.4-acre site property in a partnership with Invesco Real Estate, plans to redevelop the high-profile parcel. The site is anchored by a Whole Foods, a Crate & Barrel and includes the vacant Sears building, which is bordered by University Boulevard, First and Second avenues and Clayton Street. “It’s a fabulous location,” said Eric Buchanan, a senior managing director at OliverMcMillan.
“From a location standpoint, this really is a no-brainer,” Buchanan said. “Our first question always is, ‘Do we like the real estate?’ And we absolutely love the real estate.” He also is a fan of Clayton Lane’s neighborhood. “We love the entire Cherry Creek and Cherry Creek North area,” Buchanan said. “It really is not only the premier retail center in Denver, but in the entire country,” Buchanan said. Clayton Lane’s and Cherry Creek’s appeal only will be enhanced by the redevelopment, he said, which will include retail and apartments. “We really hope to add to the fabric of Cherry Creek North that will be mutually beneficial to us and to the entire area,” Buchanan said.
While development plans are in an early stage, he puts together what he considers a crackerjack design team. “I know you are familiar with David Tryba and we have hired his firm,” Buchanan said. Tryba had been hired by the seller of the property, Amcap Properties. The property was listed by Mary Sullivan and John Jugl of HFF. “We’ve also working with Davis Partnership, another local firm,” Buchanan said. “We are working with Britt Probst, one of the principals at Davis. He is a very knowledgeable and a very good architect. And we have also hired Gensler, a firm that we have worked with in many cities and are very happy with the work they have done for us in the past.”
The three firms are not each assigned certain tasks for Clayton Lane. “No, we firmly believe in collaboration on the design front,” Buchanan said. “One of our core philosophies is to hire the best and we often work with multiple firms on a single project. We have found that really helps the creative process.” He noted that OliverMcMillan had been looking for a mixed-use development site in Denver for several years. In fact, it had previously bid for the former University of Colorado Health Sciences Center site East 9th Avenue and Colorado Boulevard.
“We pursued that a couple of years ago,” Buchanan said. “Unfortunately for us, we came in second to (Denver-based) Continuum (Partners.) Fortunately, we were successful with Clayton Lane.” One of the big questions about the redevelopment is what is going to happen to the hugely popular Whole Foods on the site. “Whole Foods is a wonderful tenant in the project and will remain a tenant in the redeveloped site,” Buchanan said. “We have had some discussions with options with them and expanding their presence on the site,” he said.
Another key element will be to make the redevelopment extremely pedestrian friendly. “That is one of our strengths,” Buchanan said about making the site, which is now dominated by large, surface parking lots, walkable. “Connectivity to us is very important,” he said. “We want to connect to the nearby Cherry Creek trail system and all of Cherry Creek North,” Buchanan said. “Cherry Creek North already is very walkable and we think it will become even more walkable over the next five years or so as our site is developed,” he said. The Clayton Lane site also will include a number of new retailers, including some that are new to the market, he said.
“There already is a great lineup of tenants at Clayton Lane and we will build on that,” Buchanan said. “We have relationships all over the country with leading retailers and their key decision makers and we definitely want to bring some first to market tenants to Clayton Lane,” he said. At the other end of the spectrum, he said the redevelopment also likely would include some local tenants, such as chef-driven restaurants. Under the zoning, the tallest buildings on the site can be 110-feet tall, which equates to an eight-story building.
The tallest buildings likely will be apartments, not condos. “I think it will more likely will be rental at this time, although there is a market for both, as 250 Columbine has demonstrated,” Buchanan said.
The nearby 250 Columbine mixed-use center is being developed by the Western Development Group. OliverMcMillan, however, does have experience with developing for-sale units. “We have done for-sale condominiums in the past,” Buchanan said
“Our Honolulu project, for example, has some very high-end condominiums that have been very successful,” he said. As with all developers, however, the risk of litigation, is a concern when it comes to developing condominiums.
“The construction defect risk factor is still a pretty big issue in Colorado, all there are ways around it,” he said. OliverMcMillan also is looking at some offices at Clayton Lane, “although that will not be a leading program for us. Janus, for example, has its headquarters at Clayton Lane. Although Janus was not part of our purchase, if down the road they needed to expand their presence, I think our property could be a great opportunity for them.” One thing that is not in the cards, at least during the initial development, is a hotel.
“We’re not pursuing a hotel at this time,” Buchanan said. He noted that several hotels are under construction in the area “and our friends own and operate the J.W. Marriott at Clayton Lane, although that is not part of our project.” However, OliverMcMillan is a long-term owner of its developments, so it is not inconceivable that years down the road a hotel could be appropriate for the site, he noted. He said it is difficult to compare other OliverMcMillan developments that would be similar Clayton Lane. “You know, every development is different and we tailor each one to the site and the city we are in,” Buchanan aid. “But in Atlanta and Houston, and one underway in Nashville, we have dense, urban, complex projects.”
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