The receiver that oversees the operations of Denver-based Northstar Commercial Partners wants to sell the company’s stake in office space near the Denver Art Museum, against the objection of Northstar founder Brian Watson.
Receiver Mark Roberts said in a court filing last week that he has a pending deal to sell Northstar’s 5 percent stake in the Offices at the Art at 1221 N. Broadway in the Golden Triangle for $700,000.
The 52,000-square-foot office condominium, constructed in 2015, is attached to The Art Hotel Denver, a six-story, 165-room hotel that is under separate ownership. The office space is occupied by software company Four Winds Interactive.
Roberts has overseen the finances of both Watson and Northstar, which is fully owned by Watson, since last November. He was appointed to the role after Watson and related companies failed to deposit about $25 million in an escrow account after being ordered to do so in connection with a lawsuit filed against him by Seattle-based Amazon. Watson has repeatedly said he doesn’t have the necessary funds.
The Offices at the Art last sold in early 2018 for $17.2 million. Five percent was purchased by a Northstar-affiliated entity, NCP 1221 Broadway LLC. The other 95 percent was acquired at the same time by Ever Beauty LLC, an entity listing a Florida address that isn’t affiliated with Northstar.
Roberts said in a Sept. 23 filing that the co-owners financed the 2018 acquisition with an $11.1 million loan from Guaranty Bank and Trust Co., and Watson individually guaranteed up to $5.6 million of the loan.
Roberts said that the appointment of a receiver qualifies as an event of default under the loan agreement, entitling the bank to undertake various remedies ranging from accrual of default loan interest to foreclosure. That could “significantly reduce” the value of Northstar’s stake, he said.
“In light of the loan default and the economic conditions affecting the commercial real estate market, including rising interest rates, the receiver concluded that a sale of the 1221 Broadway interest would best maximize the value of such interest in accordance with the receivership order,” Roberts said.
Roberts said he concluded that Ever Beauty LLC was likely to be the only party interested in the 5 percent stake, and he negotiated the purchase price of $700,000.
That price is less than 5 percent of $17.2 million, the 2018 sale price.
The bulk of the proceeds of the sale will be distributed to Watson and his ex-wife, the members of the Northstar-affiliated entity, Roberts said.
Roberts is allowed to sell Northstar assets if he gets consent of all relevant parties including Watson, or with court approval. He said in the filing that Watson “has refused to consent” to the sale of the stake in the Offices at the Art, although Watson’s ex-wife has consented.
“This is further evidence of the receiver not managing the assets well,” attorney Stan Garnett of Brownstein Hyatt Farber Schreck, who represents Watson and Northstar, told BusinessDen Tuesday.
Amazon’s long-running lawsuit against Watson accuses him and his firm of paying kickbacks to Amazon employees in exchange for deals to develop data centers for the company in northern Virginia. Watson has denied wrongdoing.
Separately, the U.S. Securities and Exchange Commission alleges that Watson and Northstar committed multiple counts of securities fraud between April 2017 and August 2019, which includes a period in which Watson was the Republican nominee for Colorado state treasurer. Watson has also denied wrongdoing in that case.
Watson has clashed with Roberts since the latter was appointed as receiver, frequently objecting to Robert’s decisions and emailing him an average of 12 times a day for months.
In a late August court filing, Watson said he and his companies “have been forced to sit on the sidelines while they watch their assets crumble at the hands of the receiver,” whose services were costing the company between $250,000 and $450,000 a month.
Roberts, in an early September filing, responded by noting that he was appointed by the court, and argued the costs are “necessarily the result of Mr. Watson’s own prior failure and refusal to comply with this court’s orders.”