(Bloomberg) — Cress Capital, a real estate investment manager, said it acquired a $113 million mortgage on a Denver office tower from an Ares Management Corp. affiliate for the equivalent of the land cost.
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Cress bought the mortgage at “a major discount” for a “level approaching or at the pre-Covid land value” of the property, according to Ryan Parkin, managing partner of the real estate company based in Newport Beach, California.
Parkin declined to disclose the exact price. Ares declined to comment.
Investors have been seeking to sell office buildings as prices plunge after vacancies and borrowing costs increased. Prices of offices in US central business districts fell 30% in the year through February, almost double the drop for US offices broadly, according to MSCI Real Assets.
In downtown Denver, more than 37% of office space was available for lease at the end of 2023 compared with 29% for the greater Denver area, according to Savills Plc.
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The building backing the loan that Cress bought is located at 410 17th St., a few blocks from the Colorado state capitol building. The tower has 24 floors with 439,000 square feet (41,000 square meters) of office space. It was recently renovated and includes a new fitness center and a wine bar in the lobby.
Cress expects to invest $1 billion over the next 12 to 18 months in US office buildings, taking advantage of “a historic opportunity” to acquire well-located and high-quality properties at deeply discounted prices, Parkin said.
He expects more deals to come to market as borrowers are unable or unwilling to hold buildings and as lenders are forced to grapple with the losses.
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Acquiring properties on a low-cost basis enables a new owner to offer cheaper rents to help attract new tenants or convert a building to a different use, such as apartments.
“When they’re trading at land value, there are multiple options you can pursue,” Parkin said.
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