January 24, 2017 - BusinessDen.com - by Burl Rolett
After 13 years and at least one full market cycle, a planned downtown office tower could get the golden shovel treatment in the next year.
Houston-based Patrinely and Texas-based USAA Real Estate Company earlier this month struck a long-term ground lease with Denver developer Evan Makovsky. They’re planning to build a 32-story office building at 15th and Welton streets.
It’s the first concrete set of construction plans to take shape on a site Makovsky assembled in several deals starting more than 10 years ago.
“It’s time,” Makovsky said. “It’s been a vacant hole downtown. Timing is everything, and I’m hoping this is one more piece of adding to our downtown that will also contribute to the benefit of the 16th Street Mall.”
The plans, which Patrinely announced Monday, call for 606,500 square feet of office space, 13 floors of parking and a 12th-floor lounge, patio and fitness center for tenants.
Patrinely’s ground lease runs for 99 years and covers only the portion of the block where they will build the office building. Makovsky will retain ownership of the dirt but will not have a stake in the office building, he said.
The block bounded by 15th, 16th, California and Welton streets hosts a pair of office and retail buildings fronting the 16th Street Mall.
The rest of the block, almost two acres of downtown real estate, is a parking lot running from almost the 16th Street Mall to the Convention Center’s Hyatt Regency hotel.
Patrinely expects to break ground on the office building as early as January 2018. That would put the building on target for delivery sometime between 2019 and 2020. Gensler Houston designed Block 162. Cushman & Wakefield brokers Doug Wulf and Todd Wheeler will lease it.
Makovsky began planning the 11-parcel assemblage in 2004. It took a couple of more years to put the entire block together.
By the end of 2007, Makovsky said he was looking at development plans. He commissioned an Urban Land Institute study to look at the project. And then the real estate market tanked.
“By the time they gave us their view of the development, the winds of the economic world were blowing in a different direction,” Makovsky said. “We decided it would be much cheaper to hold empty ground than to hold empty buildings.”
So Makovsky said he and his partners sat on the land until the market started coming back around 2012. He said Patrinely has been putting their plans on the site in order for the last year or so, and the lease was signed earlier this month.
“The product they were proposing to build was something we could be proud of,” Makovsky said. “From the community point of view and, truthfully, as a neighbor, because we own much of the surrounding land.”
While the so-called Wall Street of the Rockies is two blocks over, 15th Street is loading up on new office space. Between Block 162 and 1144 15th St. just a couple blocks over, the west-bound one-way has nearly 1.3 million square feet of new office space set to up in the next few years.
And there’s still room to build on Block 162.
Patrinely’s ground lease covers the entire block along 15th Street between Welton and California streets. That leaves roughly 45,000 square feet of land that will still be available for development.
Makovsky said the idea is to leave the Sage Hospitality building as is. That’s a white office building at 16th and Welton that his group renovated almost 10 years ago. A red brick building at 16th and California streets, called the Washington-McClintock building, would likely be integrated into a new development.
With one deal closed, Makovsky is open to ideas for the rest of the block.
“We think generally the nature of the users are in the hospitality industry, in the retail industry and to some degree in the residential industry.”