Colorado Real Estate Journal -
1800 Glenarm Business Condominiums, the tallest building on the smallest lot in Colorado, has a new owner and new prices for its office condominiums. Denver-based Summit Investment Management quietly took over the office tower at 18th Street and Glenarm Place at the end of last year from the St. Charles Town Co. Summit invested fresh capital and renewed enthusiasm for the building, originally constructed in 1980 for an oil company during boom times in Denver, said Charlie Woolley, principal of the St. Charles Town Co., which continues to manage the building, but no longer is its owner and developer. Remaining condo units in the triangular-shaped building have been repriced more than $100 per square foot less than when St. Charles Town Co. bought the building two years ago from Fleisher Smyth Brokaw LLC. New prices start from $140 to $160 per sf, while previously units had sold for an average price of $265 per sf. “We had been working with St. Charles on a portfolio of assets and when 1800 Glenarm dropped in our laps we moved very quickly,” said Dave Jorgensen, vice president of asset management for Summit Investment. “We don’t have a lot of Colorado assets, so to pick up a first-class, completely renovated 14-story office building two blocks from our office was serendipity.” The building’s chronology is colorful, Woolley said. He bought it from Fleisher Smyth Brokaw after it had briefly been involved with an unfortunate arrangement with Erik Osborn, who last April was convicted of felony theft for siphoning at least $228,000 from 1800 Glenarm. Initially, Osborn, also convicted of real estate fraud for the nearby One Lincoln Park residential tower, and Fleisher Smyth were planning to convert the building into a swank residential tower with full floor units called Mondrian City Homes at Lincoln Park. “I got a call from a broker who asked me if I wanted to look at a failed project,” Woolley recalled from his second floor unit in 1800 Glenarm. “By that time, Michelle Brokaw (principal and CEO of Fleisher Smyth) had already dissolved the partnership with Osborn. I think everybody thought I was going to keep it as a residential condo project,” something he had done with several downtown buildings in the past. “I looked at it and I thought this would be a very good office-condo project,” Woolley said. “We had already had great success with the Equitable Building office-condo project downtown and I thought this would be our second success.” He didn’t think it was as well-suited as a residential project because it didn’t have enough outdoor space. “Our climate is pretty good here and I think you do need outdoor space such as balconies and decks to make residential work,” Woolley said. He did look at one plan to add balconies on some floors, but didn’t pursue it. But it is an ideal candidate for office condos, he argues. “Ask any broker what the average size of an office is in downtown, and you will be told it is about 4,000 sf,” Woolley said. “So with floor-plates of 4,452-sf, and 34 million sf of office space downtown, we should be getting more than our fair share of the downtown market. It really is quite remarkable. When word gets out there, our remaining floors won’t last long. I have been selling user buildings downtown for 30 years and this is the right deal at the right time.” Woolley sold 40 percent of the building to individual users from mid-2009 to 2011, which he admits was a tough time for user-building sales. Buyers have included attorneys and others in the law field, a mechanical engineering firm, accountants and wealth management firms. His property management company bought the second floor. “We were an early buyer and paid top price, but we aren’t going anywhere,” Woolley said. And that is a key point, he said. “I talked to a lot of small tenants in surrounding buildings and when I asked them how long they had been in their space, they said 10,15, 20 years or more. A lot of them are lawyers. I love talking to lawyers. The interesting thing is that a lot of these lawyers with small practices have had the same amount of space during good times and bad times. If I come back 10 years from now, they will have the same amount of space. The thing is, 10 years from now, they will have nothing to show for it. If they buy an office condo, every month they are paying down their amortizing loan and they are growing their equity. In 10 years, they will have a lot of equity in an asset. It is wealth-management. And that is something lawyers and accountants understand.” He said he isn’t bothered that St. Charles Town Co. paid a much higher price than someone who gets into the building today. “Ten years from now, we will have equity in an asset. It will smooth out. It may not have appreciated that much from where we bought, because of our price entry point. Still, that will provide a huge boost to our company’s valuation that would not be there if we were renting.” And leasing is no safeguard against a down cycle in real estate, he added. “When we first started selling these units, some nearby buildings were quoting lease rates at $29 per sf. Now, they’re closer to $20-$22 per sf for a building with Class A finishes such as this one. The after-tax cost of buying here really is $17 per sf. You can’t get anything like this in downtown for $17.” The low rates are coming as the downtown market is experiencing lower vacancy rates and is poised to see a dramatic increase in rental rates, he said. “All of the brokers are predicting a spike in downtown office rents and I think they are correct. Buying a building or an office space is an alternative that really makes sense with historic low interest rates and with business lending from SBA and community banks. These are business loans, not real estate loans. That’s important because there is money available for SBA loans.” The building was completely renovated in 2010, with all new, energy-efficient windows and new super-energy-efficient boilers, among other sustainable features. The building would have qualified for a LEED Silver rating, he said. Also, because of the new windows and shallow bay depths, natural light streams in all directions Woolley said 1800 Glenarm is a “B” building, but at the edge of an “A” location. “I consider an ‘A’ building one that has parking, and we don’t have parking,” Woolley said. “But there is plenty of parking, much of it really cheap, nearby. Also, ‘A’ buildings have restaurants in them. We don’t have a restaurant, but we are in what I call the finance district, so it’s an easy walk to anywhere downtown. And we do have a bank on the ground floor, which is kind of cool and a nice amenity.” The building was constructed in 1980 for Snyder Oil, Woolley said. It was designed by Sink Combs Dethlefs Architects. “It is a 14-story building on a very small footprint, a mere 4,500 sf,” Woolley said. “The only building that is comparable is the D&F Tower, which also has 14 stories, but is really taller because of the clock tower. But the D&F Tower was originally part of a huge department store, while this was built as a standalone building, which is pretty amazing. Do you see the same architecture at 1800 Glenarm as you do at the D&F Tower? No, of course not. But this building is so emblematic of the oil boom days of Denver that it is really to our city’s economic history. Most of the high-rises in Denver were built in the late 1970s and the early 1980s, a time when Denver’s skyline was transformed.”