Ogilvie Properties President Stuart Ogilvie values relationships in his approach to the commercial real estate market. It shows in nearly every facet of how Ogilvie Properties conducts business.
Since 1997, their investors have been comprised of friends and family. And their tight-knit staff is considered friends and family too.
Stu and his team also think about commercial real estate differently. They selectively curate properties they can rehabilitate.
“With our investment strategy, we’re a value-add player. We try to find property opportunities — any asset class – where we see issues we can solve,” Ogilvie said. “We target a certain price, then add our value. Then we sell when the asset is stabilized. That means the new buyers won’t have to deal with the problems that we did.”
And they’re steady. The pandemic didn’t shake them. They stick to a low volume of buy and sell transactions each year and keep a real estate portfolio of eight to 10 buildings.
“We’ll look at a couple properties each day and, ultimately, we’ll buy two of them in a year,” Ogilvie said. “Every building is different. We’ll have a game plan and won’t make a move unless we’re confident.”
So, when Academy Bank had the opportunity to work with Stuart Ogilvie and the selective group at Ogilvie Properties on an office building project in Central Park, CO, the personal touch from SVP and Commercial Banker Richard Morgan and the Academy Bank executive team stood out to Ogilvie.
“You need a bank that has confidence in you. They need to be confident you know what you’re doing. And they’re flexible, with a personal advocate, someone like Richard,” Ogilvie said. “He helped steward the plan because portions of the value-add items were not clear at the onset of the project.”
Attributes of confidence, advocacy and adaptability come in handy when the commercial lending deal is complicated. The Central Park project had its share of the usual and unique challenges.
Unique Property with a Common Commercial Real Estate Challenge
For the deal, Ogilvie Properties required a loan to acquire the office building now referred to as Q34. In addition, they also needed a non-revolving line of credit to draw down on to perform capital improvements, complete office space improvements and attract new tenants.
As Ogilvie saw it, the Q34 office building is a multi-tenant property uniquely positioned in the corporate real estate market. Not only is the 10-story building connected to a recently remodeled Holiday Inn to attract visitors, but it had local appeal.
“This building fulfills a niche like no other office building out there. You already have really high-end office buildings that are fairly new. And you have the very low-end. Plus, there is a very active housing market in that area where people want to have offices in closer proximity to their homes.”
And while the building was 74% leased at the time of the sale, the opportunity came with a significant challenge. The previous owner’s property management strategy focused more on occupancy than maintenance and upkeep.
Adaptability in projects such as this is critical. “We develop a business plan, but know, the project may not always happen according to plan,” Ogilvie said. “Once we peel back the layers of the onion, you discover new challenges. Richard helped advocate for our plan as it evolved.”
Among those items, one obstacle loomed large. Built in 1975, the building’s garage needed significant repairs.
“What often happens with these properties’ garages is that when bad times hit, costs are cut. And we’ve seen four or five downturns since the building was originally constructed,” Ogilvie said. “You have to take care of the garage – and that’s expensive. If you don’t, water gets into the cracks and you can count on deterioration.”
According to Ogilvie, “Academy Bank is walking with us the whole way” for the parking challenge and a trending opportunity that required some financial creativity.
Going Green Offers Opportunity and Requires Creativity
With the building more than 45 years old, it needed updates to common areas, restrooms, and HVAC systems. And they also recognized another opportunity. Improve the building’s energy efficiency.
In addition to an energy-efficient HVAC overhaul, Ogilvie also decided the building would be more attractive to tenants if it were retrofitted with a full array of energy-efficiency improvements.
“Cities are beginning to tell building owners that your buildings have to be rated a certain number on the clean-energy quotient” Ogilvie said. “Tenants are also pushing for it. They’re looking it up and, all other things being equal, they’re selecting the one that’s done the work.”
Q34’s green improvements included new heating, ventilation and air-conditioning equipment, boilers, pumps, variable frequency drives, a new building automation system, elevator modernization, water efficient plumbing fixtures, LED lighting, among others.
To finance the effort, Ogilvie Properties used the Commercial Property Assessed Clean Energy (C-PACE) program. The relatively new financing arrangement remains with the property — no matter the owner — and adds a layer of complexity for commercial lenders.
“It’s a great program the state approved that we can use to finance clean energy capital improvements,” Ogilvie said. “They make it a special district on your property tax. Why some banks prefer not to have these be part of the arrangement is because that portion of the financing is now paid back through the property tax. And that’s prior to when the mortgage is paid off. It takes a certain kind of commercial lender to wrap their head around the program and get comfortable with it.”
Why Personal Touch in Lending Matters
While Academy Bank offered a competitive rate, the deal got done because of the personal touch.
“This project with Academy Bank and with Richard was a very complicated deal,” Ogilvie said. “When we’re done with this building, the interior will be all new. We had to replace elevators, boilers, exhaust fans, lights. We renovated the lobby and put a mural on the exterior. This required us to have different buckets of money for each item. And Richard really spent the time to understand what we wanted to do.”
While Richard was key to the project’s success, the stage for a good relationship was set a year prior.
”After Richard started with Academy Bank, he brought CEO Paul Holewinski, Dan Dickinson, and Dave Rambo to our offices. They spent the time to get to know us and discuss how we work. I was honored by that personal touch,” Ogilvie said. “We’ve had a loan with Academy Bank before, so this was a nice reconnection.”
And that personal touch mattered when it came to having the confidence in Ogilvie and his team’s record of success.
How Commercial Lending Partnership Survives Pandemic
The loan closed in October 2019. With the pandemic, it almost seemed like a lifetime ago.
“It was a time of full employment and a booming economy,” Richard Morgan said. “And we gave Ogilvie and team three years of a five-year loan to execute the business plan.”
Then the world changed course in March 2020. Many businesses, such as retail spaces, felt like they were drowning. States mandated shutdowns. Work from home became the norm. Companies, including Ogilvie’s current and prospective tenants, weren’t sure if they were going to make it. As a result, building owners had to work with their tenants on payment agreements.
Even during this challenging time, Ogilvie Properties validated the confidence Academy Bank had placed with them.
“This is when knowing your clients pays dividends,” Morgan said. “Stu and Ogilvie Properties successfully managed their assets through the pandemic and economic hard times.”
Ogilvie Properties had the cash reserves to give clients room to negotiate payment terms during this difficult time. All the while, Ogilvie stayed current on loan payments with the bank.
Some attention has turned toward life post pandemic and a promising view of the future — not simply about staying current, but the building’s near-term potential.
“Our goal is 90% leased by summer of 2022,” Ogilvie said. “In the last 60 days, we’ve done 20,000 square feet of leasing at this Q34 property – even amidst the mess of renovation.”
And it’s in the very sector featured in 2020 headlines where they’ve seen success.
“We started to see medical tenants coming into the building,” Ogilvie said. “They look at the high cost of surrounding properties and say, ‘I want to spend about half that amount, and we’ll go into your building that’s getting renovated.’ So, we’re very confident about the success that this building will have.”
The right partner can help you navigate challenges. “Colorado is a very competitive bank market. To succeed you need successful clients,” Morgan said.
“Based on this relationship and experience, Academy Bank will be in the mix for future deals,” Ogilvie said.
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