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Spire construction to resume

New financing found to complete 41-story structure

By John Rebchook, Rocky Mountain News (Contact)

Published January 24, 2008 at 12:05 a.m.

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A rendering of the planned 41-story Spire building when complete. Work on the project halted in September.

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A rendering of the planned 41-story Spire building when complete. Work on the project halted in September.

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Developer Randy Nichols on Wednesday closed on $158 million in new financing, paving the way to resume construction on the 41-story Spire condo building across from the Colorado Convention Center.

Construction was halted last September on the 503-unit development after the previous lender, German-based Hypo Real Estate Capital, pulled the plug on about $160 million in financing in late August. Nichols is suing Hypo.

J.E. Dunn, the general contractor, built the first four floors of the building before construction was halted. The firm will resume work this week.

The stalled Spire marks the most prominent example in Denver of the turmoil sweeping the worldwide capital markets, which began with the collapse of the subprime market last July.

Nichols said Wednesday that he has "not been sleeping much" while trying to revive the deal but is glad to be finally moving forward.

"It has been a very challenging period," given the turmoil in financial markets, he said.

The $173 million financing package includes $118 million in a construction loan; $19 million in mezzanine financing, which is similar to a second mortgage; and $36 million in equity. Of that, all but $15 million in equity is part of a new deal since the Hypo loan fell apart.

The loss of the initial loan illustrates what began with the collapse of the residential subprime market in July and quickly spread to the other parts of the market, where previously lenders had been knocking down doors to make loans.

"It certainly was one of the first large examples of how skittish the capital markets were," said Byron Koste, director of the CU Real Estate Center in Boulder.

"If he had the financing lined up six months earlier, or probably six months from now, it would have been a no-brainer," Koste added.

Denver-based Eric Tupler, one of the nation's top real estate investment bankers, agreed. "Randy got caught when the music stopped," he said.

For more information, read John Rebchook's real estate blog at RockyMountainNews.com.