$770M TAKES EOP'S FORMER DENVER HOLDINGS FROM BLACKSTONE
COMMERCIAL PROPERTY NEWS

By TOM DWORETZKY
Published March 27, 2007

Callahan Capital Partners has bought the five-building Denver portfolio that once belonged to Sam Zell's Equity Office Properties from The Blackstone Group for $770 million. CB Richard Ellis Inc. assisted the buyer and announced the news, which was first reported by the Rocky Mountain News and other sources. The Tabor Center is part of the deal, and Callahan Capital now plans to build the Tabor II office tower on the site beginning this year.

The CB Richard Ellis Inc. Colorado investment properties--institutional group of Mary Sullivan, Ron Urgitus and Tim Swan assisted the buyer in the largest sales transaction in Denver history. The five buildings also include the US Bank Tower, 1560 Broadway, 410 17th St. and Dominion Plaza. Together, the entire portfolio totals 2.8 million square feet of space. CB Richard Ellis has also been retained to manage all five of the buildings. The leasing activity at four of them, all but The Tabor Center, will be undertaken by CBRE brokers Kevin Foley, Phil Ruschmeyer, David Hart and Chris Phenicie.

Callahan Capital's plans, according to the Denver daily's report, do not include putting a hotel or condos into the Tabor II project. The final size of the office tower will be in the 500,000-to-700,000-square-foot range.

Overall office vacancy was 13.4 percent for Denver as of the end of 2006. In the central business district it was 10.9 percent for the same quarter. According to CBRE's Swan, though, Class A space vacancy is much tighter than that in Denver at this point. "Vacancy in our Class A assets is well under 10 percent and there isn't a better place to build than the Tabor site for new high-rise construction," he told CPN.

"This deal illustrates that Callahan perceives there is long term opportunity in Denver," Swan noted. "They intend to invest here for the long term."

The deal also speaks volumes about the Denver office market in general. "This was a very competitive process with some of the largest and most aggressive capital sources competing for the deal," he observed. "As such, it is an extremely positive reflection of how capital perceives Denver."

Chicago-based Callahan Capital was started by Tim Callahan, former president & CEO of Equity Office Properties. Its partner is Morgan Stanley. Blackstone Group, which owns Commercial Property News, acquired the properties when it bought Equity Office Properties for $39 billion--the second-biggest leveraged buyout in U.S. history. Blackstone recently announced plans for an IPO, as reported by CPN last week.