Cress Capital Acquires Downtown Denver Tower – What is a Ground Lease?

The 410 has nearly 35,000 square feet of spec suites ready for immediate occupancy. Image courtesy of Cress Capital

Cress Capital has acquired The 410, a 24-story Class A office building in downtown Denver. In collaboration with Denver-based E2M Ventures, Cress had acquired the loan on the 440,000-square-foot building earlier this year and later negotiated a deed-in-lieu of foreclosure with the previous owner.

Cress Capital declined to comment on whether there was any cash consideration, or if so how much, as part of the deed-in-lieu.

The property is located at 410 17th St., within blocks of the Colorado State Capitol. The building and was completed in 1977 and renovated in 2021.

The 410 features a contemporary lobby and amenities such as a fitness center, conference and train ing facilities, an outdoor tenant lounge, a coffee bar and a detached eight-story parking structure. In addition, the building has nearly 35,000 square feet of spec suites ready for immediate occupancy.

In a prepared statement, Tom Parnell, managing partner at Cress Capital said, “We believe in the resurgence of Downtown Denver and that The 410 will contribute to Denver’s ongoing economic growth.”

The building is currently just under 30 percent occupancy, Parnell told Commercial Property Executive.

The acquisition reportedly aligns with Cress’ strategy of investing in “out-of-favor opportunities at attractive valuations” in the wake of the pandemic and rising interest rates having created record distress in the U.S. office market.

“With hundreds of billions of dollars of loan maturities facing office owners, we expect to see significant deal flow and more opportunities like The 410,” Cress Managing Partner Ryan Parkin said in the statement.

Slow times a Mile High

Metro Denver’s office market was slow through 2023, with lower construction starts and completions versus 2022 and a continuing lull in activity in January of this year, Commercial Property Executive reported in March. Further, the overall office vacancy remained above than the national average.

One bright spot was T3 RiNo, a six-story mass timber building developed in River North by Ivanhoé Cambridge, Hines and McCaffery. Last November, Xcel Energy–Colorado preleased all 220,000-plus square feet of office space at the property, intending to occupy it as Xcel’s new regional headquarters starting in 2025.

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In the simplest form, a ground lease is a long-term net lease (usually 49 years or 99 years) of land including any improvements on the said land. Assets that can be subject to a ground lease include but are not limited to, vacant land, office buildings, and large residential buildings.