Denver Brownfield Project Falls Victim to Great Recession

One of the nation’s more prominent brownfield redevelopment projects has fallen victim to the Great Recession. The 50-acre Gates Rubber Factory site in downtown Denver was going to be redeveloped into a $1 billion mixed-use and transit-oriented complex that would have been the city’s largest project since the redevelopment of the old Stapleton airport. Now, the lender holding the defaulted mortgage on the site is willing to sell it for 1/3 of its original amount.

The property was part of a 50-acre site that was occupied by Gates Rubber from 1911 to 1996 when the company was sold to Tomkins PLC for about $1.1 billion. In 2001, Cherokee purchased the site for $26 mil­lion with the hope of remediating the site and then flipping it to a developer.  In 2006, Cherokee entered into a partnership with Chicago-based Joseph Freed and Associates, who agreed to buy 24 acres of the site for approximately $45 million. Freed planned to construct 1,500 residential units, 565,000 square feet of retail space and 200,000 square feet of office space. However, the deal fell through after the real estate market collapsed. In 2007, Cherokee was able to sell a small portion of the site to Trammell Crow who constructed a 475- unit apart­ment building.

After Cherokee was unable to obtain financing to continue the remediation of the 24-acre parcel, it defaulted on its $28 million loan. Wells Fargo is now looking to sell the loan to a “loan-to-own” buyer who might be able to finance a more modest project such as a big box retail or 600-unit multi-family project. The loan is expected to fetch as little as $ 8 million. In the meantime, Gates has taken back title to a 16-acre parcel that is likely significantly contaminated.  

The original project have been approved for $126 million in public financing for infrastructure improvements and demolition, including  $85 million in tax-increment financing (TIF) arranged through the Denver Urban Renewal Authority. However, the public financing was contingent on the two properties being developed together. A buyer seeking to develop only the 24-acre site may need to re-apply for the tax credits.