10/26/2011

Brookfield Bets on Denver Tower

Brookfield Asset Management has agreed to pay more than $200 million for a trophy office tower in Denver thatís about to be vacated.

Toronto-based Brookfield is expected to make the purchase in cash and then work to lease up the 1.3 million square feet in Qwest Tower, at 1801 California Street. Market pros put the price tag around $166/sf, or $212 million. Cushman & Wakefield is brokering the sale for energy utility Public Service Enterprise of Newark, N.J.

The 52-story tower, Denverís second-tallest, was completed in 1983. It was fully leased by telecommunications firm US West, which was later acquired by Qwest. After Qwest was acquired by CenturyLink in April, a decision was made not to renew the lease when it expires next June.

Qwest has subleased more than 400,000 sf in recent years, and Brookfield presumably will seek to negotiate leases with some of those occupants, which include the SEC and two law firms. That leaves some 900,000 sf of vacant space to fill, in a market where Class-A space is 88% occupied.

Brookfield can tap into many existing relationships in the Denver market to drum up tenants. The firm has owned several high-profile Denver properties via various investment vehicles. The 1.8 million-sf Republic Plaza on 16th Street is owned by a REIT affiliate, Brookfield Office Properties of New York. Itís unclear which vehicle Brookfield is using for its latest acquisition.

Public Service, primarily an owner of energy companies, acquired the building in 1992 for a reported $240 million. The tower was recognizable on the Denver skyline by its large lighted signs with Qwestís name. Those were replaced this summer with CenturyLinkís logo.

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