Notable Downtown Denver Office Tower Headed For Foreclosure
One of downtown Denver's most recognizable office towers is heading for foreclosure.
A commercial loan on the Denver Energy Center has been delinquent since June 2021, causing the lender, JP Morgan Chase Bank, to move forward with foreclosure, according to a servicing report from commercial finance research firm Trepp.
The loan on the Denver Energy Center, at 1625 and 1676 Broadway, was transferred to a special servicer in July 2020 as a result of financial hardship stemming from Covid-19, according to the report obtained by Bisnow. The current loan balance is $102M.
Foreclosure proceedings are likely to begin this month, the report states. The borrower on the loan, Los Angeles-based Gemini Rosemont, was given special permission to use cash flow reserves to keep the loan current, but that permission expired in June 2021, at which time the loan became delinquent. The report states further that Gemini Rosemont sought a buyer for the property but was unable to obtain an offer that would cover the outstanding balance of the loan.
A representative from Gemini Rosemont did not return an email request for comment in time for publication.
The investor paid $176M in 2013 for the two buildings, which total 785K SF. At the time, the property was known as the Denver World Trade Center because of that organization’s tenancy in the building. World Trade Center Denver occupied a small portion of the building, with a lease totaling less than 3K SF, but opted not to renew its lease in favor of pursuing a new development opportunity.
In 2015, Gemini Rosemont changed the building’s name to Denver Energy Center to reflect the new tenant roster, largely made up of energy companies.
The energy sector worldwide has experienced turmoil in recent years, with a particularly problematic double-whammy coming in early 2020 in the form of a pandemic paired with freefalling energy prices that drove crude oil futures into negative territory for the first time on record.
While oil prices have since rebounded, instability in the industry persisted, and it has now increased with the onset of the Russia-Ukraine War. The past few years brought a host of mergers and some bankruptcies that impacted energy footprints in Denver, Houston and other energy-heavy markets like Vancouver.
This includes Noble Energy, once the largest tenant in the Denver Energy Center, which filed for Chapter 11 bankruptcy protection in July 2020 after cutting back its operations and furloughing employees as the demand for gas bottomed out.
Noble has since been acquired by energy giant Chevron, which established a regional business unit based in Denver. It is unclear how much space Noble currently occupies in the Denver Energy Center, if any. The Trepp report shows a lease for nearly 82K SF expiring on Dec. 31, 2021, but there is no indication if it was renewed.
Denver Energy Center’s overall tenancy dropped from 65% in late 2019 to 59% in February, according to the report. Other energy tenants in the buildings include Schlumberger and PDC Energy.
About 14%, or 4.1M SF, of downtown Denver’s office inventory was occupied by energy companies in early 2020, according to CBRE. The impact of the following two years on energy space specifically has not yet been studied by any of the major commercial real estate firms.
Metro Denver’s office tenant base has diversified dramatically in the last few decades, with financial services, legal and tech companies coming to the market in large numbers, helping to somewhat buoy the office market.
