The Denver Business Journal

Crescent Reaches into Cherry Creek
February 16, 1997

Two buildings sold for $40M

Fort Worth-based Crescent Real Estate Equities Inc. will be the biggest owner of office space in upscale Cherry Creek, as part of a $40 million purchase.

The ravenously acquisitive Texas real estate investment trust, run by financial whiz Richard Rainwater, expects to close next week on the purchase of companion buildings Madison Square I at 55 Madison St. and Madison Square II at 44 Cook St. in the posh Denver retail and financial district, the company confirmed.

Both Madison structures measure some 125,000 square feet and are being sold by the Denver Technological Center. Real estate experts estimate the buildings will command some $110 a square foot, or $27.5 million.

In Cherry Creek, Crescent already owns the 130,652-square-foot Citadel on Cherry Creek Drive South and the 415,000-square-foot Ptarmigan Place on North Cherry Creek Drive near Colorado Boulevard, which it swooped up in 1995 for $31.4 million.

"This is the culmination of our strategy nationally, which is to buy where we can create critical mass," said Gerald Haddock, Crescent's president and CEO. "We're doing that in Cherry Creek and in Las Colinas in Dallas."

Added Doug Wulf, senior brokerage consultant at Denver-based Fuller and Co.: "In Cherry Creek, Crescent will own four of the five top buildings. The only one they won't own is the Bank of Cherry Creek building."

Also part of the purchase package is the 169,000-square-foot AT&T Communications Building at 1875 Lawrence St. in downtown Denver, another DTC holding. Its sale price is estimated at $70 a square foot, or $12 million. However, that structure's namesake and anchor tenant, AT&T, has been looking at other office options, including Schuller Plaza.

"I still believe in the renaissance recovery of downtown Denver," said Haddock. "The only issue is when."

"These deals are just another indication that Crescent is a believer in Colorado as it continues to expand its portfolio in this country," said Sherman Miller, managing director and branch manager at Cushman & Wakefield of Colorado Inc. "And that one of those properties is in downtown Denver is a sign of renewed interest by investors in that market."

The Business Journal first learned of Crescent's interest in DTC-owned office properties in early 1995.

Tech Center spokesman Ray Bullock was unavailable for comment.

One of the largest REITs in the country with total market capitalization of almost $3 billion, Crescent was formed in 1994 by Rainwater, who built the Texas Bass brothers' fortune from millions to billions. The 50-ish Rainwater also was the brain behind the mammoth Columbia/HCA Healthcare merger of the late 1980s, a deal that changed the health care industry by prompting rival companies to buy more hospitals and lower costs.

Among the trust's most recent purchases are 92 Charter Behavioral Health Systems psychiatric hospitals for $400 million in a sale-leaseback deal and controlling interest in the 50-story, 1.2 million-square-foot Trammell Crow Tower in downtown Dallas for $162 million. In December 1996, Crescent announced it was buying $100 million in commercial real estate across the country, including the two Denver properties.

Last year, Crescent reported funds from operations of $87.6 million, or $2.71 a share, compared to $64.5 million, or $2.38 a share, for 1995. Net income also jumped last year from the year before, to $37.1 million, or $1.39 a share, from $27.4 million, or $1.31 a share.

High on the burgeoning Sun Belt, Crescent entered the metro-Denver market in the early 1990s and has amassed a thoughtful, plum portfolio. Until its deal with the Tech Center, the REIT had bought 2 million square feet of property valued at $275 million in this region.

Crescent has plucked trophies such as the 310,000-square-foot Regency Plaza One in the DTC, which it bought in 1994 for $32.4 million, and downtown's 550,807-square-foot MCI Tower, which includes the 613-room Marriott City Center Hotel, for $106 million in 1995. It snared the 295-room Hyatt Regency Beaver Creek ski resort hotel in early 1995 for $40.2 million.

In Colorado Springs, Crescent owns the Briargate Office Tower.