Joint venture plans upgrades to newly acquired Capitol Center

Capitol Center
Capitol Center consists of a midcentury office tower connected to a two-story historic building.

A California joint venture has acquired Capitol Center in downtown Denver as part of a two-building, two-state acquisition.

Harbor Associates LLC, which made its first acquisition in Denver a year ago, bought Capitol Center in partnership with Belay Investment Group LLC. The price was $29.8 million. The property at 225 E. 16thSt. and 1600 Sherman St. consists of a 12-story midcentury office tower attached to a historic two-story building, for a total of 166,000 square feet.

The joint venture also purchased a 136,000-sf office building in Glendale, California, for $28 million.

“We’re thrilled to be teaming up with Belay to purchase these two assets,” said Justin Loiacono, a principal at Harbor.

In-place occupancy at Capitol Center, located in Denver’s Uptown neighborhood, was 47 percent at the time of the sale.

Harbor plans to add an approximately 5,000-sf amenity area and landscaped rooftop deck to the top floor of the tower.

“We couldn’t be more excited about Capitol Center’s potential as a modern, yet historic office environment with unique and breathtaking roof-deck views of downtown Denver and the surrounding mountains,” said Joon Choi, Harbor Associates principal and repositioning lead.

“We think that’s going to be a pretty unique offering in the market,” he said. “We’ve not come across an opportunity for tenants to have this type of amenity with these views.”

The repositioning also will include lobby renovations and the addition of speculative suites.

Harbor Associates was attracted not only by the asset’s value-add opportunity but also by its history, he said. Originally the estate of Charles Kountz, a Denver Dry Goods Co. owner, the property was redeveloped for Capitol Life Insurance in 1924. The Colorado Trust is the anchor tenant in the historic building, designed by architect Harry James Manning. The tower, designed by modernist architect Edwin A. Francis, was added in 1960.

“We’re excited about the opportunity to make our own improvements but respecting what happened in the past. The finished product will tie together a lot of this history of the project but also bring a lot of the modern conveniences and amenities that are in high demand today,” Choi said.

CBRE brokers Mike Winn, Tim Richey, Chad Flynn, Jenny Knowlton and Charley Will represented the seller.

The acquisition is Harbor Associates’ second in the Denver market. The company also is repositioning the former Colorado Business Bank building, a historic structure at 821 17th St. in downtown Denver.

With 17 acquisitions in the past three years, the company owns approximately 750,000 sf in the Los Angeles area and 275,000 sf in Denver.

“Harbor has acquired eight projects totaling $255 million in the year 2018 alone,” said Harbor principal Paul Miszkowicz. “We intend on building our recent momentum by sourcing new opportunities and pursuing similar strategies in submarkets in Southern California, Denver and Salt Lake City with interesting demand drivers in order to meet our acquisition goal of $250 million over the next 12 months. We have a robust pipeline of activity behind this transaction and look forward to continuing to build our Western regional portfolio.”

“We are looking forward to teaming up with Harbor to complete the value-add repositioning of 700 N. Central and Capitol Center,” added Eliza Bailey, managing principal for Belay. “Both properties present us with an opportunity to make strong risk-adjusted returns through strategic renovations that focus on improving the tenant experience in partnership with an experienced sponsorship team in markets that we believe have significant room to grow.”

Featured in CREJ’s Nov. 7-20, 2018, issue

Jill Jamieson-Nichols has been an Editor with the Colorado Real Estate Journal for more than 15 years, providing coverage of office, industrial, hospitality and mixed-use development news in the Denver metro area, plus all property types in Northern Colorado, Boulder County and along the Highway 36 corridor. Prior to joining CREJ, Jill was Editor of…