A Game of Chance
Downtown developer Bruce Berger is giving Denver a lesson in real estate speculation, and it will only cost the public $45.8 million.
Fourteen months ago, Berger bought the square block between California and Welton streets and 14th and 15th for the bargain-basement price of $3.3 million. He spent an additional $3 million to tear down the former Denver Post building and turn the entire site into a parking lot.
But in documents submitted to the Denver Urban Renewal Authority as part of his recent proposal to build a new Marriott Hotel that would serve the convention center across the street, Berger valued the land at an astonishing $22 million, meaning he could stand to make a profit of about $16 million if the deal is approved.
In addition, he is asking the city for a $45.8 million public subsidy -- nearly twice as much as the Adam's Mark Hotel received -- to help him build the hotel.
The entire plan is contingent on a $268 million ballot proposal to expand the convention center that Denver voters will consider this fall.
Sources in the real-estate community say Berger may be able to pull off the mammoth deal -- and line his own pockets -- thanks to a series of decisions by the Denver City Council.
"Berger created a vision for the site that is supported by local government," says fellow downtown developer Charlie Woolley. "The possibility of executing that vision makes the land more valuable. He was masterful in doing this."
A former New Yorker who made a fortune in Manhattan real estate, Berger is quickly becoming Denver's Donald Trump. He was smart enough to buy up much of the Golden Triangle area near Civic Center Park in the 1980s when the prices were low; that district is now downtown's latest hot spot.
He has also developed a reputation as a man with a remarkable sense of timing in the often tumultuous world of real estate and has proved adept at manipulating Denver city government. His strategy for the Marriott followed a disciplined, step-by-step game plan:
Also, since a city building will be used as collateral on the bonds, Denver could have to tap into general-fund tax revenues to pay off the bonds in the event of a serious economic downturn.
Although the construction of the hotel depends on voters' approval of the plan to expand the convention center, most observers think that will be an easy sell, since the expansion is being backed by Mayor Wellington Webb and will be funded by additional sales taxes on rental cars and hotel rooms -- services that are little used by residents.
Berger says he can't comment on the value of the 15th Street property since he is negotiating with DURA over city support for his project, but he insists that it is far more valuable than it was when he bought it. And it may be: The going rate for a handful of premium sites in downtown Denver is close to the $200-per-square-foot value he put on his property.
"We took a lot of risk up front," Berger says. "We've removed all the obstacles to development." After the former Post building was torn down and the land cleared of environmental contamination, Berger says, the value rose dramatically. City council's decision to allow Berger to build a parking lot on the block upped the value even further.
But some city council members and others are now questioning Berger's $22 million estimate, and it has become an issue for the city. "The city is asking similar questions as you've asked," Berger adds.
Councilwoman Susan Barnes-Gelt fears that civic boosters like the Denver Metro Convention & Visitors Bureau and the Denver Metro Chamber of Commerce want the hotel and the convention center expansion so badly that the city council will feel intense pressure to give Berger everything he is asking for -- resulting in an expensive deal for the city.
"Is land on 14th Street worth that much?" she asks. "I think the land price is wildly inflated. It's our job to be diligent in scrutinizing this and getting a good deal for the city.
"Once the convention center passes," she adds, "[Berger] will have more leverage that will make it tougher for us to be good negotiators."
All of which means that Berger could very well bag his $16 million by the end of the year. Not surprisingly, his display of real-estate chutzpah is the talk of the development community.
"It takes cojones," says Woolley with a laugh.
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