Colorado Real Estate Journal -
The $98 million sale last month of 1700 Broadway represents not only a strong price for a high-rise office tower in downtown, but also the latest turnaround deal for the seller, the Denverbased Broe Group. “Pat Broe and Bob Jacobs are certainly astute investors and they are as entrepreneurial as any individuals you will find,” said Mary Sullivan, who represented Broe in the sale of 1700 Broadway with fellow HFF broker John Jugl. “It was a risky deal when they bought it in 2004 for $34 million,” Sullivan said. “They did what it took to reposition the building, ultimately selling for many multiples of their equity investment.” Broe heads his namesake family owned company, which although large and diversified, has a reputation for being very low-profile. Jacobs is the chief investment officer of the Broe Group, which has three affiliated companies: real estate, energy and transportation. Even within its real estate platform, it is far more diverse than most companies that own downtown office buildings. For example, it has raised more than $250 million in capital to buy distressed debt in a joint venture with a major Canadian pension fund and is gearing up to raise hundreds of millions more for new investment strategies. The Broe Group also provides advisory services to institutional investors, including advising the Lehman Estate on a portfolio of 24 million square feet of institutional-quality industrial real estate. The diversity of its hold ings allowed the company to forge a truly unique relationship with the 1700 Broadway’s anchor tenant. “When we bought the building, the largest tenant was Whiting Petroleum,” Jacobs said. “Before we even closed, we met with Whiting and they told us they were leaving for another downtown building,” Jacobs recalled. “They didn’t like the building and they didn’t like the way it was being managed.” They were assured there was a new sheriff in town and things were about to change. “We fixed everything they didn’t like,” Jacobs said. “Pat and the rest of the team at the Broe Group now have a great relationship with Whiting.” The relationship led to the energy affiliate of the Broe Group, Great Western Oil & Gas Co., to create a joint venture for a “very significant drilling program” in the Bakken oil fields in North Dakota. Great Western Oil & Gas launched in 2005, a top 10 producer in the Denver-Julesburg Basis. The ability to create the type of relationship the Broe Group did with Whiting would be an avenue closed to most developers in Colorado or the U.S. It’s also one of numerous examples of Broe leveraging its three business platforms into something much greater than the individual platforms. “One of the unique aspects of this deal is that we had this big tenant that was going to leave, and not only stayed and grew after we solved all of the issues that made them unhappy, but we were able to build a business relationship with them outside of the building,” Jacobs said. Today, Whiting leases north of 40 percent of the 394,151-squarefoot 1700 Broadway. The buyer of the 22-story building was a joint venture of Artis Real Estate Investment Trust and MDC Realty Advisors USA Inc., an adviser for private investors. Artis is a Canadian real estate investment trust with about a $2 billion market cap. It is based in Winnipeg, Manitoba. The purchase included a separate 12-story parking garage with 826 spaces, providing a parking ratio of 2.1 stalls per 1,000 sf. The building was more than 95 percent occupied at the time of the sale. The tower does not have a 13th floor, which is why it is often described as a 23-story building. It opened in 1956. “One of the interesting things about it was the very first highrise office buildings designed by the now renowned architect I.M. Pei,” Sullivan said. Pei and fellow architect Harry Cobb designed it in 1952 as Denver’s first skyscraper. It was originally called the Mile High Center and was renamed 1700 Broadway after it was purchased by the Broe Group. idered a A striking feature of the building is the large atrium that is part of the Wells Fargo Center (known as the “cash register” building), which is connected to 1700 Broadway by an enclosed bridge over Lincoln Street. “It’s a beautiful amenity,” Sullivan said. She said photos from the building’s opening “look just like the office tenants had stepped out of ‘Mad Men,’ with men wearing suits and skinny ties and women wearing hats, like they do in the popular TV series.” The building wasn’t on the market when Broe purchased it in 2004. “The day we bought it was a Friday and on Saturday we commenced on a very significant improvement program,” Jacobs said. The company initially spent more than $1 million on upgrades to the common areas and the HVAC system, bringing the building from a B-minus level to what was viewed by the real estate community as an A- building. Later, Broe plowed even more money into the building, turning it into an A building, according to Sullivan. What they did with the building was so tasteful and so well done that we knew all we had to was go get people in the building and it would exude this ‘wow’ factor,” Sullivan said. “We had a tremendous response. I think we gave 34 tours. “Yes, there are newer and taller buildings out there,” she continued. “But the upgrades Broe did were so tasteful and consistent that it has this timeless sense about it. Even the HVAC system impressed people. It is clearly top-notch and made to last. So often, it seems like systems are designed for obsolescence, but not in this case,” Sullivan said. The 1700 Broadway deal doesn’t represent the first real estate rodeo for the Broe Group, which was founded in Denver in 1972 and has consistently made money in good times and bad. In 2011, for example, it sold the Denver Club building for $20.25 million, after having acquired the 231,458-sf building in 2010 for an estimated $8 million, as part of a distressed $400 million loan portfolio. Also, it recently opened Skyline 1801 in downtown Denver, after investing more than $10 million into the former HUD apartment complex, which is now a luxury 144-unit rental community. It also is experiencing strong rental activity in its 50 S. Steele building in Cherry Creek North, after renovating the 10-story, 120,000-sf office building it has owned since 1988. Although it has sold 1700 Broadway, it continues to own the Trinity Place office tower at 18th Street and Broadway, where it has completed a major renovation of the lobby and common areas. One of the tenants at Trinity Place isn’t as big as Whiting Petroleum, but is without a doubt better known – former Gov. Bill Owens.