Colorado Real Estate Journal -
Brookfield Office Properties will make a significant investment in 1801 California Street, bringing best-of-class office space to the downtown Denver market at a time when no new office towers are being built. Brookfield, with an investment consortium, bought the 1.4 million-square-foot building for $215 million. With 80 percent of the leases expiring in July, it plans an aggressive upgrade that will include a new lobby, renovated plaza and common areas, as well as a complete redo of the elevators, including their mechanical systems. “It will certainly have the feeling and physical attributes of being a first-class, top-tier property,” said David Sternberg, senior vice president of Brookfield’s Midwest and Mountain Region. The investment is a rousing endorsement of Denver and the future of the downtown office market. “We are making significant investment in Denver because we believe in Denver and we like the market fundamentals that we currently see in Denver,” said Sternberg.“We think it’s a great building. We think it’s a fantastic location and we think it’s a wonderful community, and there have been so many positive things happening in the community,” he said, citing Denver’s investment in infrastructure and growth in the downtown housing, hospitality and office markets. Known as the Qwest building prior to Qwest’s acquisition by CenturyLink, 1801 California is master-leased to CenturyLink/ Qwest through June. CenturyLink recently signed a 149,000- sf lease that runs through 2017. Other tenants include Patton Boggs and MWH Americas Inc. As leases in the building expire, Brookfield will have up to 900,000 sf to lease, including as much as 270,000 sf of contiguous space, Sternberg said. While there aren’t many large blocks of competing office space available, “There aren’t a large number of really large tenants in downtown Denver,” said Sternberg. “But we’re making this investment because we believe that Denver is only going to be more attractive to users,” he said. Cushman & Wakefield of Colorado brokers Tim Richey, Nick Pavlakovich and Mike Winn represented PSEG Energy Holdings, a Newark, N.J.-based diversified energy company and wholly owned subsidiary of PSEG, in the sale of the building to Brookfield. The 54-story building is the second-tallest building in Denver behind Republic Plaza, which Brookfield also owns. “Given the prominence of the tower and the magnitude of the planned redevelopment effort, this sale is one of the most notable transactions to occur during our 20-plus years in the business,” said Richey. The asset drew a dozen bids from qualified national and international investors. Winn said he has never seen a time when downtown Denver commanded so much attention nationally. “Denver has really become a first-tier city in all respects,” he said. Brookfield Office Properties’ economic interest in 1801 California is approximately $110 million, or 51 percent. It will manage the property on behalf of the consortium. Built in 1983, 1801 California is across the street from the 18th and California light-rail stop, has 1,500 parking spaces and is within two blocks of two bus stations. Tom Lee, an office broker with Newmark Knight Frank Frederick Ross who is familiar with the building, said Brookfield’s acquisition is an “incredible statement” about its commitment to the Denver market. Although there has been a lot of concern in the market about a glut of office space coming on line with the CenturyLink/ Qwest downsizing, there are few buildings that will compete with the quality of space Brookfield intends to offer, and Lee believes Brookfield will be very successful. “They’re going to redo the building in a first-class fashion where it is as nice as any other building downtown. I think the profile of Brookfield is they’re going to push rents. They’re going to do the kinds of deals that are accretive to values,” he said.