Someone new is manning the Cash Register Building.<\/p>\n
A court-appointed caretaker was named Wednesday to oversee the Wells Fargo Center, the most well-known office tower in downtown Denver, which defaulted on its loan last December.<\/p>\n
An affiliate of investment bank Morgan Stanley, which loaned $327 million to the owner of the Wells Fargo Center in 2019, filed a lawsuit shortly after 4 p.m. Tuesday requesting a receiver be appointed.<\/p>\n
Sixteen hours later, shortly after 8 a.m. Wednesday, Denver District Court Judge Andrew Luxen agreed to do so, naming Judy Duran of CBRE to the role.<\/p>\n
The tower\u2019s owner, New York-based Brookfield Properties, declined to comment.<\/p>\n
The appointment escalates the distressed nature of the 52-story tower at 1700 Lincoln St.. which is the city\u2019s third-tallest building. After Brookfield defaulted on the loan, it landed in special servicing, which one analyst\u00a0described to BusinessDen\u00a0in January as \u201ca sort of \u201cpurgatory.\u201d<\/p>\n
The 1.2-million-square-foot building is 79 percent leased, according to CoStar. But that figure is poised to drop. Building namesake Wells Fargo\u00a0told BusinessDen last month\u00a0it plans to give up three of its nine floors. Coworking firm WeWork, meanwhile, said it was\u00a0giving up three\u00a0of its five floors.<\/p>\n
In total, 523,000 square feet — or 43 percent \u2014 of the building is listed as \u201cavailable\u201d on CoStar, meaning the space is vacant or the current tenant is not expected to renew. Some current tenants are offering to sublet their space for $17 a square foot annually full-service.<\/p>\n
According to its lawsuit, Morgan Stanley issued the building\u2019s owner a $327.7 million loan secured by the property in November 2019. The loan was split across two notes — one for $277.1 million and the other for $50.6 million.<\/p>\n
At the time, the tower was owned by Boston-based Beacon Capital Partners, which paid $387.5 million for the property in 2012. In October 2020, Brookfield took an undisclosed stake in the tower through an arrangement that didn\u2019t make the price public.<\/p>\n
The loan matured on Dec. 9, 2022, meaning Brookfield needed to pay it off in full by that date. The company failed to do so, thus defaulting.<\/p>\n
The request for the receiver this week came nearly 10 months after default.<\/p>\n
\u201cProtecting and preserving the income stream from tenants at the Property, including the Leases and Rents, is critical to preserving the existing value of the Property pending foreclosure or other disposition of the Property,\u201d the company said in its filing.<\/p>\n
Duran is to be paid $2,500 a month to serve as receiver for the Wells Fargo Center, plus $200 an hour (not counting the first six hours) for time spent preparing for or attending court proceedings, according to court filings.<\/p>\n
Morgan Stanley made the request through its trustee, which happens to be Wells Fargo Bank. Attorney William Meyer of Polsinelli filed the lawsuit on behalf of the lender.<\/p>\n
Receivers have been appointed for other area office buildings in recent months, including\u00a01801 Broadway\u00a0downtown. Duran is\u00a0already serving as receiver\u00a0for the Triad Office Complex in Greenwood Village following a loan default by the property\u2019s Denver-based owner Focus Property Group.<\/p>\n
Office landlords across America have been challenged by increased interest rates and the pandemic, which has prompted many companies to downsize or attempt to sublet. That has made it challenging for landlords to refinance or sell when loans mature.<\/p>\n
The Wells Fargo Center is one of two Brookfield-owned downtown towers that defaulted on their loans. The other is Republic Plaza. In that case, however, Brookfield was\u00a0able to exit default earlier this summer\u00a0through an extension deal it worked out with its lender.<\/p>\n