The Denver Newspaper Agency is working on a deal to sell the new $88 million joint headquarters of The Denver Post and the Rocky Mountain News and lease it back from the buyer.
The agency hopes to announce the deal within about 10 days, just before the newspapers begin moving into the 300,000-square-foot building at Colfax Avenue and Broadway.
“We’re not in the real-estate business,” said Dan May, senior vice president and chief financial officer of the DNA. “We want to be a more traditional group that leases its downtown real estate.”
May declined to identify the investors interested in buying the building.
The performance of interest rates has been advantageous, May said. When the DNA financed the building, rates were low. Now, with rates rising, it might make sense for the agency to lock in a lease rate that would make its payments predictable for a long period.
If interest rates rise, as many people expect, locking in payments over the long term would be beneficial for the DNA, May said.
The mechanism of the deal would be to set a “cap rate,” or a percentage of the sale price, that would determine how much the DNA would pay over time to lease the building.
In the negotiations, various terms are being discussed. They involve different ways the deal could be structured, including a possible option for the DNA to repurchase the building.
The deal would mean the agency is certain of its operating costs for 15 to 20 years, said Jim McGrath, senior vice president of real-estate company Studley’s Denver office.
The capital markets have been involved in a real-estate-buying frenzy, which makes it a good time to sell the building, said Todd Parker, executive vice president of Equastone Real Estate Investment Advisors’ Denver office.
“We’ve continued to see a lot of capital that wants to go into real estate with a limited amount of product,” he said. “It’s seen as a secure investment that is yielding perhaps better than alternative investments.”
The new building is currently owned by SunTrust Equity Funding LLC. The DNA holds what is called a “synthetic lease” on the building and has the ability to regain ownership of it and sell it if that appears advantageous.
Staff writer Margaret Jackson can be reached at 303-820-1473 or mjackson@denverpost.com.
