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What is a Covered Land Play?

If a real estate investor has ever told you that they focus on covered land plays, they mean that they buy buildings that can be leased (so that the landlord is "covered" with rental income) while they wait for the land to become more important for future uses and, therefore, more valuable at a rate that outpaces the normal appreciation of real estate. In other words, the focus is on the land rather than the building and the investor expects the value of the land to increase sharply in the coming years. The timeline is personal to the investor's approach but can be long-term (10+ years) or short term (1- year). The neighborhood may be turning but is there a 20-year lease in place that prevents the landlord from selling the property to a developer? That is not a covered land play. Is the land in the path of development but the structure upon it is so run-down that it is unleasable? That is is not a covered land play. Here are two examples of covered land plays that an REC client bought earlier this year:

photo cred: Costar Group

5060-5062 N Federal Blvd

Located across the street from Regis University and its planned development of Regis Village, these buildings have permanent unobstructed views of the mountains. Located just north of exciting development in the Highlands and Sunnyside neighborhoods and south of a new mixed use luxury residential neighborhood, the location has potential for redevelopment. Furthermore, the block already has zoning that allows for three stories and so the potential for a developer to buy the entire block to build a mixed use project seems high. The building is fully leased to longstanding tenants, a liquor store and a tavern.

photo cred: Costar Group

3470 S Federal Blvd

Located a block south of the 72-acre Loretto Heights redevelopment and a block north of Hampden Avenue, this neighborhood has certain grit but that is about to change and, again, REC's client expects to eventually sell the property to a developer who wants the entire block. At the time of acquisition, the building had seven months of term left on the lease at an undermarket rate. Given the building's permitted non-conforming autobody use, the drive-in paint booth and the six drive-in doors with 13' clearance height, many tenants expressed interest in leasing the property and REC's client signed a lease with a new tenant for the coming years.

We welcome the opportunity to strategize with you to determine if covered land plays are the right fit for your investment objectives as opportunities remain abundant for income-generating properties located in the path of development.

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What is a Covered Land Play?

If a real estate investor has ever told you that they focus on covered land plays, they mean that they buy buildings that can be leased (so that the landlord is "covered" with rental income) while they wait for the land to become more important for future uses and, therefore, more valuable at a rate that outpaces the normal appreciation of real estate. In other words, the focus is on the land rather than the building and the investor expects the value of the land to increase sharply in the coming years. The timeline is personal to the investor's approach but can be long-term (10+ years) or short term (1- year). The neighborhood may be turning but is there a 20-year lease in place that prevents the landlord from selling the property to a developer? That is not a covered land play. Is the land in the path of development but the structure upon it is so run-down that it is unleasable? That is is not a covered land play. Here are two examples of covered land plays that an REC client bought earlier this year:

photo cred: Costar Group

5060-5062 N Federal Blvd

Located across the street from Regis University and its planned development of Regis Village, these buildings have permanent unobstructed views of the mountains. Located just north of exciting development in the Highlands and Sunnyside neighborhoods and south of a new mixed use luxury residential neighborhood, the location has potential for redevelopment. Furthermore, the block already has zoning that allows for three stories and so the potential for a developer to buy the entire block to build a mixed use project seems high. The building is fully leased to longstanding tenants, a liquor store and a tavern.

photo cred: Costar Group

3470 S Federal Blvd

Located a block south of the 72-acre Loretto Heights redevelopment and a block north of Hampden Avenue, this neighborhood has certain grit but that is about to change and, again, REC's client expects to eventually sell the property to a developer who wants the entire block. At the time of acquisition, the building had seven months of term left on the lease at an undermarket rate. Given the building's permitted non-conforming autobody use, the drive-in paint booth and the six drive-in doors with 13' clearance height, many tenants expressed interest in leasing the property and REC's client signed a lease with a new tenant for the coming years.

We welcome the opportunity to strategize with you to determine if covered land plays are the right fit for your investment objectives as opportunities remain abundant for income-generating properties located in the path of development.

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