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Monday, May 20, 2024

Cress Capital Buys Foreclosure-Ready Denver Office Tower

Cress Capital, an industrial and office real estate investor, last month completed the acquisition of a 24-story office building in Denver.

The Newport Beach-based company paid an undisclosed amount in the non-arm’s length transaction, a type of deal in which the buyer and seller may have an established relationship prior to the sale. The seller for the tower, named The 410, was Rialto Capital, a Miami-based investment management firm.

The deal follows the company’s acquisition of the tower’s $113 million loan, which it obtained in partnership with Denver-based investment firm E2M Ventures LLC. Ares Management Corp. (NYSE: ARES) provided the Rialto loan, which has an outstanding balance of over $96 million.

Office towers like The 410 have seen better days. Valuations for many high-rise buildings in the sector have been slashed due to slow return to work.

“Demand for office has fallen, but it’s not completely obsolete,” Cress Managing Partner Ryan Parkin told the Business Journal. “We think the current office investment is very attractive.”

Cress is betting on the sector’s long-term growth. Low demand for offices is currently shrinking the supply, as investors tear down or convert office buildings into other uses.

“Broadly speaking, we’re going to have little to no office construction set against a backdrop where office product is being removed,” Parkin said. “As job growth occurs, demand for office will eventually rebound.”

Cress also negotiated a deed-in-lieu of foreclosure with Rialto.

The office tower, which was 28% leased at the time of the sale, runs more than 440,000 square feet at 410 17th St. in Denver.

The building is a mile from the Colorado State Capitol. The tower underwent a major renovation in 2021.

“With well-capitalized and stable ownership behind the project, The 410 will be at the top of its competitive set, offering tenants an unparallelled hospitality-driven experience,” Cress Managing Partner Tom Parnell said in a statement. “We believe in the resurgence of Downtown Denver and that The 410 will contribute to Denver’s ongoing economic growth.”

The troubled office market is conducive to Cress’ strategy, which is to invest in what its officials call out-of-favor opportunities at attractive valuations.

The company aims to continue to invest in distressed office buildings and either lease them up, as with The 410, or redevelop them for other uses, officials said.

Colorado Investments

Cress isn’t the only local firm throwing dollars at Colorado assets.

Irvine-based apartment investor The Bascom Group LLC in March acquired a 360-unit complex in Aurora, Colo., for $74 million, or about $206,000 per unit.

Bascom to date has invested $1.5 billion in Colorado; its portfolio in the state currently stands at over 12,000 units.

The state’s business-friendly environment has made it popular among real estate investors, officials said.

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Sonia Chung
Sonia Chung
Sonia Chung joined the Orange County Business Journal in 2021 as their Marketing Creative Director. In her role she creates all visual content as it relates to the marketing needs for the sales and events teams. Her responsibilities include the creation of marketing materials for six annual corporate events, weekly print advertisements, sales flyers in correspondence to the editorial calendar, social media graphics, PowerPoint presentation decks, e-blasts, and maintains the online presence for Orange County Business Journal’s corporate events.

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