Creative deal closed: Property transaction that will keep industrial distributor even bigger
A multistage real estate deal that closed in Grand Junction last month created more value for the regional economy than the $800,000 the buyer paid for a half-acre of improved industrial property on the city’s west side, several people involved in the transaction said this week.
The deal to buy newly developed property at 635 W. White Ave. signaled a publicly traded distribution company’s continuing commitment to the Western Slope and benefited stakeholders across the region, company officials said.
Regional mining and oil and gas interests counting on quick delivery of essential equipment and supplies can rest assured a key link in the supply chain will remain anchored in Grand Junction thanks to the deal announced last week.
Winners include two innovative real estate firms, a national distribution company, its local employees and customers, and the distributor’s new landlord from Ophir.
The effort began more than a year ago when the Grand Junction branch of Cleveland-based Applied Industrial Technologies — a company that distributes a variety of industrial parts and a fixture in the city for the past 30 years — decided it needed new office and warehouse space to grow, said Dennis Jones, general manager of the company’s local “store.”
The old place on 25 Road — actually a “chopped up” series of unattached buildings and trailers — was about as clean, comfortable and efficient for customers and workers as one might expect after 30 years of boom and bust on the Western Slope, said Jones, 56, who worked his way up the ladder over 10 years at the distributor’s outlet in Craig.
“We’re an industrial distributor,” Jones said. “We cater to heavy industry, mines, underground coal mines, strip mines, power plants, oil and gas.”
Applied Industrial Technologies operates more than 500 stores nationwide, including two managed by Jones. Jones’ other store is in Craig, the city where he lives. Situated near the intersection of U.S. Highway 40 and Colorado Highway 13, Craig was once a primary crossroads for resource extraction companies before the construction of U.S. Interstate 70, he said. Together, the two stores employ more than a dozen people.
“Applied takes it a little further than most other distribution companies,” he said. “We offer our technical expertise. Not only do we sell products, we can also go out and identify and troubleshoot solutions to problems as they come up.”
Nationally, the company reported earnings in excess of $630 million in the third quarter of its fiscal year ended March 30, according to documents filed earlier this year with the U.S. Securities and Exchange Commission.
“We pride ourselves as a single source for our customers. We can get everything from A to Z. Typical core items for us are safety supplies. We specialize in hydraulic hoses, bearings, power transmission equipment and the like,” Jones said.
The decision to expand could have resulted in Applied Industrial Technologies moving to another Western Slope city along the Interstate 70 corridor, but innovative thinkers at two of the region’s busiest commercial real estate offices found a way to make it all work, according to Brian Bray of Bray Commercial.
Factors that could have weighed against the distributor staying in Grand Junction included the recent steep drop in oil prices and the exodus of thousands of energy jobs across Colorado in 2015, Jones said.
“(The oil and gas industry) is in the tank,” he conceded.
An even bigger barrier was the distributor’s inability to find developed industrial land that fit all of its needs despite months of concentrated searching, Bray said.
Applied Industrial Technologies leapt every hurdle to stay in town because it considers “Grand Junction ... a very valuable market,” Jones said. “Even though it seems a little depressed right now, we see a lot of potential here.”
The commitment to Grand Junction sparked Rocky Mountain Commercial Brokers to initiate a deal more common in Denver than on the Western Slope, Bray said.
With a commitment from Applied Industrial to lease a structure built to its liking, Bray helped negotiate a deal for the seller, Sixbey Investments, where Sixbey agreed to erect a building suited to the long-term needs of Applied Industrial, while the buyer, Gearty Properties of Ophir, agreed to pay $800,000 for the half-acre hexagonal lot with improvements and a long-term lease in place.
Gearty took title to the property, but received much more. It now owns a valuable piece of industrial land with improvements on the west side of the city, but also a new building with a happy, committed, long-term tenant already in place, Bray said.
Constructing the build-to-suit unit was key to securing a rock-solid, long-term tenant and securing a long-term tenant was key to unlocking the buyer’s real estate investment cash box, so to speak, Bray said.
The transaction also made good sense for Bray’s client, the seller, Sixbey Investments, which paid $342,000 — less than half the sales price — when it bought the property in 2014, county records show. Applied Industrial Technologies recently completed the move from a larger, but far less functional building at 573 25 Road, into a new 7,500-square-foot building and is “in the process of getting settled,” Bray said.
“It’s nice to see another national company make a commitment to the Grand Valley,” he said. “The building was built to the tenant’s specifications by Merritt and Associates and is a great example of that contractor’s dedication to excellence.”
Applied Industrial agrees.
“The plans went back and forth through me until we got it to where we needed it,” Jones said. “Brian (Bray) and the contractor did a really nice job. (The project) was well built, well prepared.”