Colorado Real Estate Journal - September 2, 2015
Billy Riesing knows he could have quickly sold the historic Zen Center of Denver building at 3101 W. 31st Ave. many times over if not for its single-family zoning. “It’s at the gateway to (West) Highland, which has been one of the hottest, if not the hottest, neighborhoods in Denver for the past several years,” said Riesing of Pinnacle Real Estate Advisors. In fact, a number of well-known “heavyweight” infill developers did tour the 17,090-square-foot church that was built in 1920, since Riesing first listed it in May 2014. Designed by one of Denver’s most prominent architects, Burnham F. Hoyt, developers passed on buying the building because of the zoning, although they considered everything from retail to wedding halls for the Renaissance Revival-style structure near Speer and Federal Boulevard. However, rezoning likely would be a tough haul in the neighborhood, Riesing said. A plan for a three-building, luxury apartment community a few blocks to the west at Lowell Boulevard and West 32nd Avenue, for example, was delayed by more than a year because of a lawsuit filed by neighbors. And because of a historic preservation grant for the interior, the church area needed to be kept intact, which likely precluded apartments or condos, as that area cannot be chopped up. The building showcases detailed masonry craftsmanship, vaulted ceilings, colored glass panes and a “breathtaking” amphitheater with a double-shelled skylight and an Austin pipe organ. The building has received funding from the State Historical Fund and there are covenants in place restricting what can be done in the interior. Despite the obstacles, Riesing said he found the perfect buyer. The building recently was purchased for $1.8 million by two investors on behalf of the nondenominational Sanctuary of Downtown Church. The Zen Center had paid $460,000 in 1998 for the building and the adjoining parking lot, according to public records. The Sanctuary currently leases a historic church building about a mile to the east at 2215 W. 39th Ave. “It’s really difficult for these urban churches to stay in the neighborhood, because property prices have risen so much, so the Sanctuary really is the perfect buyer for the Zen Center,” Reilly said. A developer, by contrast, likely would have put a lot of conditions on the sale – at the top of the list being a successful rezoning. Since there is no guarantee a rezoning effort would be successful, there would be quite a bit of risk to his client, Reilly said. “Someone can offer $10 million, but if they don't close, it is meaningless,” Reilly said. John Winslow, principal of Winslow Property Consultants, wasn’t involved in the deal, but is familiar with the Zen Center. He wholeheartedly agrees with Reilly’s assessment. “The difficulty of marketing a building with the restrictive covenants coupled with it not being a “development play” made it a rifle versus a shotgun marketing approach,” Winslow said. “There are a limited number of buyers in the state and even the U.S. that would be able to make this work, unless they were another church, which Sanctuary Downtown Church is,” Winslow said. The sale represents a great buy for both the seller and the buyer, according to Winslow. “The $1.8 million sales price is slightly north of $105 per square foot (excluding the 11,492-squarefoot parking lot), way below reproduction cost,” Winslow said. “To replicate this building with modern materials would be at least four times the purchase price,” he said. It’s also a beautiful building, he said. “The architectural integrity of this building is second to none,” Winslow said. The Sanctuary Downtown plans to move into the Zen Center for its first service in October, said Peter Thiel, pastor of the Sanctuary. “We are pretty excited,” Thiel said. “We like the building. We think it is a beautiful building and a great place to meet,” Thiel said. Buying, instead of renting, likely will end up saving the church money, he said. He said that the Sanctuary has been in its current church building for seven years and he expects the rent is about to go up. “We’ve actually been looking to buy for a couple of years,” Thiel said. “It bothered some people in our congregation that our money is going to a landlord, and not into ownership,” he said. “They did not think that was a good use of our capital,” Thiel said. “We really like our current building, but we have spent quite a bit of money in rent over the years.” Alexander Becker of Real Estate Consultants of Colorado represented the Sanctuary in the transaction. Thiel said they are thrilled to be able to buy a building in the neighborhood. “It’s great that we found a building in the neighborhood that we could afford,” he said. The Sanctuary likely will invest money in renovating the interior. “We probably will want to restore the sanctuary area to its original glory,” Thiel said. The parking lot is zoned U-MX- 3, which would allow for a threestory building for residential, office and retail uses. “I don’t think they are planning to do anything right away with the parking lot. Long-term, I’m not sure what will happen to it,” Thiel said. Other News Consolidated Investment Group plans to build an eightstory, mixed-use building on a 0.7-acre site it recently purchased in Capitol Hill. The Denver-based company purchased the land as well as the adjacent three-story, Route 40 building with approximately 21,000 square feet. The Route 40 building’s ground-floor retail is 100 percent leased to two tenants. The building at Colfax and Downing in Denver also includes existing ground-floor retail and 28 apartment units. “We have no plans to tear it down,” said Carli Franks, strategic marketing manager at Consolidated. Consolidated is studying what to do with the building as far as potential upgrades, she said. The eight-story building will include 140 apartment units, retail and co-work office space. “We have not selected an architect yet and the plans from different architects have been so different, we don’t yet know how many square feet the building would have or the ratios between the office space and residential,” Franks said. The apartments will be luxury units, she said. CIG plans to start construction in the summer of 2016. The building’s common areas will include a west-facing courtyard, a rooftop deck, fitness center and clubroom. It will be pet and bike friendly. “We are excited to continue the revitalization of the Colfax corridor and expand our presence in the Capitol Hill neighborhood,” said Chris Winn, asset manager at CIG. “We envision an opportunity to introduce an exciting collaboration of spatial uses including retail, shared office and residential living,” Winn added. In addition to Route 40, CIG owns the 466-unit Parkway Apartments at Colfax Avenue and Speer Boulevard, and is the developer of the Eastpark 70 Industrial Park in Aurora. Overall, CIG’s real estate portfolio consists of investments in more than 20,000 multifamily apartment units and several million sf of office buildings, industrial buildings and land holdings throughout the United States, Israel and Europe. “Our team focuses on maximizing the value of our existing real estate portfolio while strategically acquiring new real estate assets in select highgrowth markets, like Denver, including Dallas, Houston, Austin and Phoenix,” said Tim Bertoch, vice president of real estate at CIG. “As a Denver-based investment group, we have been excited to see our local real estate market thriving over the past several years, allowing us to explore even more opportunities right here in our own backyard,” Bertoch added.