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The Future of Downtown Denver Is Height

March 26, 2018



The Future of Downtown Denver Is Height

Denver is growing up. Taller buildings are the future of downtown Denver because they allow the city to achieve the density it needs to solve its affordable housing crisis. “More density is the key,” Larimer Associates CEO Jeff Hermanson said. Hermanson recently announced plans to build two new buildings on Larimer Square, including one that will bring affordable housing to the historic block. The buildings will be on the alleyways, not Larimer Street itself. Historic Denver has voiced concerns about what Larimer Associates is proposing, but Hermanson said that the design will be sensitive to the context of the block. “We want to enhance the character of Larimer Square, not detract from it,” he said. “Our lack of affordable housing is a wake-up call that our success could be challenged if we don’t solve that issue. Cities are always evolving and innovating, and the ones that thrive embrace change the most.” Another project on the drawing board is transformation of a parking lot at 19th and Wazee streets in the Ballpark neighborhood. The West Lot mixed-use development will span an entire city block and include a Colorado Rockies Hall of Fame and an outdoor gathering plaza. It will include hospitality, office, residential, retail, entertainment and food and beverage spaces. Colorado Rockies owner, Chairman and CEO Dick Monfort said the 90K SF parking lot is zoned for eight stories, which would make a 750K SF building possible. His development team is committed to the open plaza concept, but still needs to achieve density on the site, so the buildings will need to be taller. The West Lot mixed-use development will need to go for height to achieve density around an open plaza. Monfort said he does not see the downtown building boom stopping any time soon. “There just isn’t a lot of land left downtown,” he said. “There are parking lots.” He predicts some of the older buildings in downtown are likely to be demolished to make way for taller new buildings. “I think you’ll see a prettier skyline and a higher skyline,” he said. Downtown Denver Partnership President and CEO Tami Door said Denver’s significant growth has put the city at a pivotal point and that the bigger it becomes, the more complex the challenges are. “One big gap in the center city is that we definitely need more parks and public spaces,” she said. “The question is how do we secure land so that as the city builds up that those spaces are reserved? How do we make sure we have a way to manage them, keep them safe and program them?” City leaders also need to be having tough conversations about how to form policies that address complex issues such as mobility, homelessness, affordable housing and opioid use. “Look at housing affordability,” Door said. “If that was a challenge five years ago, it’s going to be exponentially bigger in the future. We’re a growing city. As we grow, everything grows — not just the positive development. The challenges grow, too. People are shocked to see these social issues expand from year to year.” (Bisnow)



Artis Pays $70M for Remaining Interest in Office Assets

Artis Real Estate Investment Trust has acquired the remaining 50 percent interest in two Class A office buildings in downtown Denver for $70 million. The Canadian REIT owned 1700 Broadway and Hudson’s Bay Centre in joint ventures with an affiliate of MDC Property Services Ltd., a boutique real estate company focused on commercial markets in Western Canada and the Western U.S. “MDC’s investment strategy wasn’t going to be as long term as a REIT’s, and so this was not necessarily a surprise to us that this would come around. It was just different time horizons for the investment,” said Philip Martens, executive vice president for Artis’ U.S. region. The 22-story 1700 Broadway totals 394,174 square feet of leasable area and is 85.5 percent occupied with tenants that include Whiting Oil & Gas and the Colorado Secretary of State. Artis purchased a 50 percent interest in the building in 2013. It acquired the remaining joint venture interest for $51 million, which represents a building value of $258.77 per sf. Artis assumed the seller’s portion of the existing mortgage, resulting in a total mortgage on the property of $43.9 million at 3.11 percent interest. The remaining $29 million of net equity required, less typical closing adjustments, was satisfied with issuance of 2.44 million trust units of Artis REIT at $14.85 per unit. Hudson’s Bay Centre is a 20-story building on the 16th Street Mall. Located at 1600 Stout St., it comprises 179,938 sf and is 81.2 percent leased to a mix of tenants, including law firms, and financial services and energy companies. Artis acquired a 50 percent joint venture interest in Hudson’s Bay Centre in 2014 and bought the remaining interest for $19 million, representing a building value of $211.18 per sf. It also assumed MDC’s existing mortgage, resulting in a total mortgage of $19.7 million at 3.76 percent interest. Artis issued 748,241 trust units of the company at $14.85 per unit to satisfy the remaining net equity requirement. Both buildings have undergone recent improvements. A major lobby remodel and Starbucks expansion, along with elevator updates, occurred at 1700 Broadway. Hudson’s Bay Centre has new conference and fitness facilities. “We continue to amenitize our buildings to make them much more attractive to tenants, and future tenants too,” Martens commented. Artis, which owns three other properties in the Denver market, invests in office, retail and industrial properties. Its portfolio, as of Dec. 31, comprised approximately 24.8 million sf. (Colorado Real Estate Journal)



LoHi Mixed-Use Building Sells for $12M

A five-story mixed-use building in LoHi landed $520 for every square foot of space. Agoura Hills-based Miller Brothers Cos., acting as Miller Brothers Umatilla LLC, purchased the 23,485-square-foot building at 2930 Umatilla St. in Denver last week for $12.21 million, according to county records. The quarter-acre lot features office and restaurant space. Tenants include restaurants El Five and Sushi Ronin, financial planning firm Colorado Wealth Group and tech company Connekt. The building was constructed in 2014. Miller Brothers did not respond to a request for comment. The office and residential properties listed in a portfolio on the company’s website are all in California. The LoHi building was sold by Denver-based developer Gravitas Development Group. The company, which did not respond to a request for comment, purchased the lot in July 2011 for $975,000, according to records. (BusinessDen)



Metro Denver Dealt Huge Increase in This Decade

After the San Francisco Bay Area, metro Denver experienced the largest apartment rent increases this decade. But plenty of new supply should put future rent gains closer to the national average, according to a new report from RealPage, a real estate research firm. Between 2010 to 2017, metro Denver apartment rents rose 46.9 percent, the fourth-highest increase in the country after three northern California metros: San Jose at 51.3 percent, Oakland at 51 percent and San Francisco at 48.6 percent. But Denver’s effective rent, at $1,401, remains substantially below those cities. San Francisco apartment rents, for example, now average $3,288 a month and Oakland’s $2,259. “You can legitimately make the case that Denver’s outperformance for rent growth in this cycle was influenced by the fact that the metro came into the cycle with rents that were unusually low,” said Greg Willett, chief economist with RealPage. Rent gains in metro Denver averaged 7.6 percent a year in the first half of the decade. But in the second half they are averaging 3.4 percent a year. Those numbers represent the changes from quarter to quarter in the same properties, which neutralizes the impact from new and expensive luxury apartments entering the market. Willett said Denver-area landlords spent much of the last decade trying to work off a glut of apartments from the tech boom. From late 2001 to late 2004, rents fell 17 percent and didn’t regain their 2001 highs until 2011. (Denver Post)