A Canadian developer constructing a two-tower condo complex at the edge of downtown Denver has purchased an adjacent ground-leased property.
Vancouver-based Amacon bought 1800 Welton St. on Wednesday, according to public records.
The 0.35-acre lot has a 3,300-square-foot single-story building on it, where 7-Eleven operates. The building dates to 2013, according to property records.
The property is across an alley from a 0.68-acre site where Amacon is building its condo project, which will top out at 38 stories. The firm broke ground in the spring and expects to complete it in late 2024.
The 1800 Welton property was owned for decades by the Bowes family. But on Wednesday, records show, they sold it for $8 million to another entity, which turned around and resold it to Amacon for $4.7 million.
Sound complicated? Blame the ground lease, and the ground sublease.
The middleman in the transaction was Neil Macey, founder of a company called Denver Equities.
Macey told BusinessDen Thursday that in 1973 the Bowes family ground leased the property to First National Bank, which later became part of Wells Fargo. He said the deal was for 60 years.
Under a ground lease, the property owner continues to own the land. But the ground lessee effectively controls the property and owns any buildings that are constructed.
Macey said that First National, and then Wells Fargo, had a drive-thru bank on the property. But at some point that closed and the bank, no longer wanting to use the site itself, opted to sub-ground lease it to 7-Eleven, which constructed the current building.
Macey said that, after he purchased the property as Real Property LLC on Wednesday, Wells Fargo paid him to terminate its ground lease. He didn’t disclose the sum, but it would clearly need to more than make up for the $3.3 million loss that Real Property LLC sustained when it resold the property. (Wells Fargo’s ground lease was for a longer period than 7-Eleven’s sublease, so the property was worth less after the bank terminated its ground lease because the property had less guaranteed future income.)
Macey said that 7-Eleven still controls the site, with its ground sublease effectively becoming a ground lease with Wells Fargo’s buyout.
Mark Sheldon, a local executive with Amacon, confirmed that 7-Eleven still has a ground lease for the property.
“There were just a lot of parties to the overall deal,” he said.
Sheldon noted that Amacon “obviously” believes in the area, given the firm is spending tens of millions of dollars next door. He said the company might down the road seek to redevelop the 7-Eleven site, although that would hinge on the retailer’s ground lease expiring or terminating through some agreement.
Sheldon said Amacon has also had some discussions about buying the parking lot next to 7-Eleven, which is under separate ownership. A deal there would give the company control of a full city block, including the portion it’s already building on.
“We’d have to put a few things together to make a developable site,” Sheldon said.