The building at 101 W. Colfax Ave. opened in 2006. (Thomas Gounley)
Denver paid $4.5 million over the appraised value when it acquired The Denver Post office building last month.
The 11-story, 305,000-square-foot structure at 101 W. Colfax Ave. was valued at $84 million in spring 2023 based on recent downtown sales, according to the appraisal report obtained by BusinessDen through a public records request.
The price that Denver paid — $88.5 million, or $290 a square foot — amounts to about a 5 percent premium.
The building is fully leased to The Denver Post through late 2029, although the newspaper has moved out. It subleases some of the space to multiple tenants, including the city, which occupies more than half the structure. Denver plans to eventually use the structure to expand the court system.
Denver’s purchase of the building closed on April 11. The City Council approved the purchase agreement and a separate vote related to the financing of the deal with 9-4 votes in January and March.
A key concern for some council members, even some of those that voted yes, was that the city might be overpaying for the property.
“From the analysis that I’ve gotten, we are getting this building really expensive,” Councilwoman Amanda Sandoval, who ultimately voted in favor of the purchase, said in February.
Councilwoman Shontel Lewis noted that nearby office buildings were distressed, with owners defaulting on loans, and the pandemic and remote work drastically altering leasing demand. She noted the city had recently spent tens of millions to lease office space in the city’s tallest building, which helped the building’s loan exit default.
“The taxpayers have bailed out Republic Plaza, with no benefit to them, and now this deal feels the same,” Lewis, who voted against the purchase, said in January.
When questioned about the possibility of overpaying, Lisa Lumley, the city’s director of real estate, pointed to the appraisal as justification for the price tag.
“I already have an appraisal in this place that supports this with a number of comps, so no, I feel very comfortable with bringing this forward at the price we’re at,” Lumley said in December.
Council members pushed back against Lumley at the Dec. 5 meeting when she said she “wasn’t comfortable sharing” the appraisal report with them before they voted on the purchase. She later relented. All council members were provided the appraisal report on Dec. 11, according to Joshua Rosenblum, spokesman for Denver’s finance department.
The city declined to provide the appraisal report to BusinessDen prior to the closing of the deal. BusinessDen requested it again the day after the city took ownership.
The appraisal report was written by Guy DiRienzo, a local executive with Newmark Valuation & Advisory, a division of New York-based Newmark. The appraisal took place at the city’s request on April 23, 2023, about seven months before BusinessDen broke the news of the city’s planned purchase of the building. The appraisal report, for which Denver paid $7,500, is dated May 17, 2023.
DiRienzo had previously appraised the building in 2022 for its lender, according to the report, which doesn’t disclose how the building was valued at that time.
The appraisal used two approaches to value the building. Denver’s Rosenblum highlighted a price-per-square-foot range produced by the “sales comparison approach,” which attempted to value the structure based on six office building sales that took place downtown between June 2021 and February 2023.
Those sales were:
1801 Wewatta St.: In February 2023, the 101,000 square feet of office space sold within the Union Tower West building sold for $54 million, or $535 a square foot.
1401 Lawrence St.: In June 2022, the 310,000-square-foot office tower sold for $233 million, or $751 a square foot.
1800 Larimer St.: In January 2022, the 538,000-square-foot office tower sold for $291 million, or $540 a square foot.
1755 Blake St.: In September 2021, the 118,000-square-foot office building sold for $61.2 million, or $517 a square foot.
1099 18th St.: In September 2021, the 594,000-square-foot Granite Tower sold for $203.3 million, or $343 a square foot.
1615 Platte St.: In June 2021, the 113,000-square-foot office building sold for $60 million, or $531 a square foot.
The appraiser adjusted those sales to reflect ways the properties differed from 101 W. Colfax Ave. For example, unlike The Denver Post building, none of the six properties are in the Central Business District — the end of downtown that is struggling more — so the appraiser made a “downward adjustment” to each sale to account for the “superior” location of the other six buildings.
“The stigma attached to the property due to its inferior CBD location has considerably hurt the asset,” the report said of the Post building. “Furthermore, the lease in place with the Denver Newspaper Agency that expires on September 30, 2029, while considered a positive factor, is offset by the fact that they have vacated the building and subleased much of the space.”
The appraiser sometimes made an “upward adjustment” to the sales as well. The Denver Post building is newer than Granite Tower, for instance, and has more amenities than 1615 Platte St., he said.
Ultimately, the appraisal decided the six sales, after being adjusted to account for the Post building’s traits, amounted to $240 to $303 per square foot. He then determined that made the Post building worth $84 million, or $274.75 a square foot.
Rosenblum, the city spokesman, noted that the $290 per square foot the city paid fell within the adjusted range.
“Additional factors the city considered when agreeing to a final purchase price included the existing above-market rent (revenue stream) that offsets the purchase price, the close proximity to the existing downtown courthouses which was a driver of the city’s need for the building, and that the city’s IT infrastructure is already installed in the building which reduces our post-acquisition costs,” Rosenblum said.
The second approach used to value 101 W. Colfax Ave. was the “income capitalization approach,” which looked at specific leases signed at nearby buildings, including ones in the Central Business District.
The appraiser came to a similar valuation using this approach: $84 million or $85 million, depending on the method used.
Denver bought the building from an affiliate of New York-based American Properties, which paid $93.42 million for it when it was completed in 2006.
