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DENVER-In one of the largest office deals in the nation this year HRPT Properties Trust has acquired the 17th Street Plaza office building here for $135 million, or $202 per square foot, according to local industry sources. Built in the early 1980′s and sporting a Gold rating from the US Green Building Council, the 32-story, 666,653-square-foot building is 93% occupied, with an 110,000-square-foot tenant set to move out in 2010.

HRPT was not the highest bidder but it offered the best, quickest deal, paying all cash after completing its due diligence in little more than a month, concurrent with contract negotiations, according to sources familiar with the deal. Some other bidders offered significantly more but required significant third-party financing. The cap rate on the transaction reportedly mirrored other institutional deals nationally, coming in at between 8.5% and 9%.

The listing brokers, CB Richard Ellis executive vice presidents and institutional investment specialists Mary Sullivan and Tim Swan, confirmed the transaction generally but declined to confirm or discuss any detail. HRPT, which owns approximately 67 million square feet in 500 properties, did not respond to a request for comment.

The Skidmore, Owings and Merrill-designed property includes an attached parking garage and occupies a full city block bounded by 17th and 18th Streets, and Larimer and Lawrence Streets. The office tower has a granite-clad exterior and a two-story atrium lobby. The property performed “phenomenally” well for JP Morgan during its eight-year hold, making the lack of appreciation less painful.

Tenants in the building include Molson Coors, Marsh & McLennan and Xcel Energy. Xcel is the tenant that will be leaving in 2010, in favor of 1800 Larimar St. Xcel’s lease rate and the early knowledge of its departure are such that the upcoming vacancy is seen as an opportunity for the new owner, not a predicament, according to local industry sources. Average class A asking rates are currently in the mid $20s per square foot, fully serviced.

While the sale of 17th Street Plaza went smoothly things did not work out as well for Wells Fargo Center, which at 52-stories and 1.2 million square feet is one of Denver’s largest office buildings. Macquarie Office Trust of Australia bought the building in 2006 for $284 million and had it on the market for sale earlier this year before recently pulling it back.

The problem, according to local sources, was the loan on the property, which carries a 5.25% interest rate and doesn’t mature until 2015 but is equivalent to $230 per square foot. The best offers that came in were reportedly only $10 per square-foot over the loan amount, which reportedly created concern that, given significant declines in valuation, the lender might lean on its “insecurity clause,” a provision in some notes that gives the lender the right to demand payment in full at any time the lender deems itself insecure.

Those types of issues help explain why, according to LoopNet, the volume of commercial deals nationally slumped 70 percent to $110.4 billion in the first quarter on a year-over-year basis.

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