Colorado Real Estate Journal - July 1, 2015
When Gerald Hines, the legendary real estate force, was in Denver last year as a keynote speaker at the Colorado Commercial Real Estate Symposium, Bill Mosher asked him what was his “secret sauce” to not only survive, but prosper, during almost six decades of real estate cycles, good and bad. “Fifty percent equity,” Hines, without hesitation, told Mosher, a senior managing partner at Trammell Crow Co. Hines was true to his word in his latest venture, the 40-story, 640,000-square-foot 1144 Fifteenth office tower, southeast of Larimer Square. The Denver office of Holliday Fenoglio Fowler LP, better known as HFF, secured the 50 percent-ofcost, four-year, interest-only loan for the property. Eric Tupler, a senior managing director at HFF, declined to name either the lender or the loan amount. However, records show Wells Fargo made a $158.9 million loan to Hines. Coincidentally, Hines also developed what is now known as the Wells Fargo Center. The distinctive office tower, which opened in 1983, is known as the “cash register” building. “Like the Wells Fargo Center, this is going to be a really memorable project and, similar to the Wells Fargo Center, 1144 Fifteenth is going to be a building that will change Denver’s skyline,” Tupler said. Records show that Hines paid $17.97 million in cash for the 39,306-sf site for the tower. That equates to $457.21 per sf and $27.15 per buildable sf, for the tower. In downtown, the average office space is more than 30 years old. “It really is the only game in town” for this kind of new, highrise office space, Tupler said. It is the first high-rise of its stature to be built since the Lauder Co. developed the 43-story 1999 Broadway tower in 1985. Thirty years ago, the downtown Denver office vacancy rate was hovering around 25 percent, interest rates were at 12.5 percent and subleased space in Class A buildings could be found for as little as $6 per sf. However, finding a lender for 1144 Fifteenth had its challenges, Tupler said. “It is very challenging for banks, from the perspective that it is a spec building,” without any tenants having agreed to prelease space, he said. Banks are more comfortable making loans when there is substantial preleasing, Tupler said. That is understandable, because under banking regulations known as the Basel Accord, “Construction loans directly impact a bank’s balance sheet. And it further impacts it when there is not much leasing or no leasing,” Tupler said. Wall Street does not provide construction loans and the HFF team received a bid from an insurance company, he said. “Despite the Basel hurdle, there was strong interest from lenders,” Tupler said. A big part of the interest is because of the strength of the Hines organization, which was founded in 1957, he said. “Hines is a fantastic sponsor and has a stellar record,” Tupler said. It also was a “very conservative loan” of only 50 percent of the cost, he said. The privately owned Hines is a global real estate investment and development firm with a presence in 185 cities in 19 countries. Hines has $84.9 billion of assets under management, including $42.7 billion for which Hines provides fiduciary investment management service, and $42.2 billion for which Hines provides third-party property-level services. Last year, Hines completed more than $8 billion in transactions on behalf of its investment management clients. The firm has 104 developments currently underway around the world. During the past 58 years, Hines has developed, redeveloped or acquired more than 1,000 properties, totaling more than 339 million sf. That is the equivalent of almost 10 times the amount of office space in downtown. In addition to Tupler, the HFF debt and equity placement team was led by senior managing directors Mary Sullivan and John Jugl, along with executive managing director Scott Galloway and associate director Leon McBroom. “1144 Fifteenth will be the premier asset in Denver when completed and it will be the core office tower delivered in the last three decades,” Jugl said. “Given the office space starts on the 14th floor, tenants will have incredible unobstructed views of the Rocky Mountains and the city,” according to Jugl. “Based on the development restrictions of surrounding properties, these views should remain unobstructed for the life of the project,” he said. And despite the size of the loan for 1144 Fifteenth Street, it's not the biggest the HFF team in Denver has originated. “We once did a $700 million loan for out-of-state properties and we did a loan for the Foothills Mall in Fort Collins that was larger,” Tupler said.
-The Denver office of NorthMarq Capital arranged a $5.3 million loan for 34 Marketplace at 1415-1453 North Denver Ave. in Loveland. Constructed in 2003, the retail center consists of one, singlestory inline retail building totaling 34,341 square feet. Tenants include Subway, Supercuts and Smashburger. Greg Benjamin, senior vice president, and Jeff DeHarty, associate producer, arranged the refinancing for the borrower.
-The June 17-June 30 edition of the Colorado Real Estate Journal should have reported Great Western Bank is headquartered in Sioux Falls, South Dakota, not Sioux City.