Denver’s S&L; Dread: Still More Real Estate Bargains

Of all the communities wondering just what the savings and loan crisis managers will be emptying from their bag of bargain property holdings, none could be more curious about it than Denver.

Denver, where, over the last few years in a bludgeoned real estate market:

--Nearly 15,000 Housing and Urban Development-foreclosed condominiums and houses were tagged at prices that look like typographical errors, some to be had for $100 down;

--One wreck of a house got posted on a realty sales board for $4,000, and a realtor, in the space marked “terms,” scribbled “Visa or MasterCard.”

--High-rise offices, virtual vertical ghost towns, went begging, with come-ons like 20 months free on a 60-month lease. For a time, in some parts of town, you could rent space for $4 to $8 a square foot, not much more than what the carpeting cost.

Denver, overbuilt and underpriced, has had its fill of bargains, thank you. It is just getting back on its feet, and the last thing it needs is more real estate being put up for sale cheap.

Yet 17 of the 35 thrifts in Colorado failed or had to be reorganized under federal direction. That left under federal control 1,838 pieces of property--vacant land, office towers, houses--enough to give Colorado the fifth-largest helping of S&L; leftovers in the nation (compared to 307 so far in California), a federal spokesman said.

Out there, too, there is some skittishness that any perceived “dumping” of cheap acreage or buildings by the government bailout agency, Resolution Trust Corp., may slow Denver’s recovery from the wild economic rodeo ride of the 1980s. In just a few years, the real estate market here deflated like a leaking balloon and property values shriveled 30%, 50%, even 60%. The worry again is that S&L; fire sale prices might yank other values down with them, just as happened with an earlier bonanza of HUD houses.

“To me, the wild card is the S&L;,” said economist Doris Drury, president of the Center for Business and Economic Forecasting at Regis College in Denver.

“If they go about this slowly, methodically, and do not dump real estate on the market, Colorado’s economy over the next few years can absorb what they’ve got,” she said. “If they attempt to dump too much real estate, they’re going to hit very hard a market just now beginning to show some life in it, and you can imagine what would happen.”

Denver brokers would rather not imagine it. After three years of sell-offs, the city is still full of good deals. Out-of-towners in a buy-low mood fly in, eager for bazaar-style bargains. Business people find they can still purchase offices for half the cost of building them. Residents often find it cheaper to buy than to rent.

“We have been through Armageddon here,” said one major real estate firm’s senior vice president, Rick Pederson. “Commercial (realty) people are still a frightened lot. The very size of RTC and the thickness of the book of RTC properties frightens them.” He added wryly that RTC has “become a prime user of office space in downtown Denver,” where the vacancy rate still exceeds 20%.

RTC has sought to assuage Colorado’s concerns. “The legislation says we can’t dump,” said RTC spokesman Kevin Shields, and “whatever we have for sale has been (offered) for sale already” by the foundering S&Ls--although; not, admittedly, all at once.

With those pledges and a second look at the portfolio, some brokers can breathe more easily. “The initial thought was ‘My goodness, the government’s gonna own everything and have big impact,’ ” said John Fuller Sr., chairman of the board of Fuller & Co., “but it’s not nearly what everyone was afraid it’d be.”

There are some signs that confidence in the region is growing. A new airport is going in; the convention center opened this month to 10,000 Christian booksellers, and Denverites will vote Aug. 14 on whether to build a stadium to lure major league baseball to town.

Still, Denver will take a long time to unjitter completely. Take the case of the InterPlaza shopping complex, which went up along a blue-collar commercial strip during the build-thrill days of the 1980s.

Its showpiece, a pricey French department store called Printemps, opened and closed within 16 months. The exotic, fan-shaped glass canopies over the entrances were cracked in a recent hailstorm. Nearby boutiques such as Revillon, its name still cut in gold over the door, stand empty. The renovation of a Montgomery Ward store nearby was stopped midway through the project and an enormous, whimsical hammer and ladder are still fixed to an exterior wall, testimony to intent, if not achievement.

Despite the failure of the complex, one local expert pegged the current value of the 55-acre site alone at $10 million. But big headlines earlier this month announced that a Denver development group had settled its ownership of the project for $1 million cash, plus some financial and legal trade-offs. The agreement with RTC shifted to taxpayers $115 million in loans reportedly poured into the InterPlaza project by a belly-up East Coast S&L.;

RTC’s Shields, who stressed he was speaking hypothetically and not about the InterPlaza deal, said the only numbers that matter are the prices that markets will pay now . “Someone says that is a $1-million (sale). Just because the value is $10 million, someone is going to say, ‘God, you’re giving it away!’ but . . . you’re working within the local economy.”

Prices set too high would be so out of kilter with Denver’s blue-plate specials that parcels might sit, collecting dust--and taxpayer-funded fees--for years. “They don’t want to dump,” Drury said, “but (if) they just see inventory piling up day after day and get a little desperate--’What are we gonna do about this?’ ”

Steve Weiner of Signet Partners, which hopes to become an asset manager for RTC holdings, said: “It’s in everybody’s best interest to see that those assets end up being owned by private citizens, so the problems can be cured by the people who will own them.”

Yet Denver brokers, honed by now to quick deals in the land of the quick draw, tend to deride the RTC’s bureaucracy-shackled sales techniques as uncompetitive and clumsy, where offers may take a month to get an answer.

“There’s always the specter (that) they’ll become efficient and effective and somehow dump” properties, Pederson said, “but most of us who have lived with that bear for some time are not afraid of it any longer.”

That “bear” has had its way with Denver for a long time. Like some country music lyrics, Denver has seen just how far down low can get.

To anyone who reads the history books, the oil-soaked 1970s and ‘80s offered nothing new and promised nothing permanent. A century earlier, in the Leadville silver strike, for example, laundering a dozen shirts could cost $3 and a space in the business district could be rented for $300 a month--at a time when a miner’s wage was $3 a day.

In 20th-Century Denver, big oil and the big building to match it romanced the city into a spree. Secretaries who could spell “cat” and type 20 words a minute commanded $25,000 a year, recalled developer John Nielson. In the bar at a downtown hotel, he said, oilmen were “throwing around $100 bills like it was play money. Every night was New Year’s Eve.”

A Caterpillar equipment dealership worked round-the-clock shifts, and still businesses stood in line begging for office space. Tax breaks pushed builders as hard as demand did, and even indifferently built condominium units brought $75,000 each. And the S&Ls; were often there, ready to loan money.

“It engenders a feeling that you are really bulletproof,” added Nielson, who considers Denver’s experience and his own a cautionary tale. In five years he went from a huge development business, a lavish house, private plane and catered parties to counting pennies in a rented home, after settling his business claims without declaring bankruptcy.

“Just like the Gold Rush, just like the past six or seven years on Wall Street, just like the tulips in the Netherlands a few hundred years ago (when thousands of dollars were paid for a single rare bulb), Denver was no different,” he said. “We all got swept up in it and we all made a lot of money, and made it fast.”

They lost it fast, too. Like silver, the oil business roared into Colorado and trickled out. Mining, including oil and gas, dropped 23,000 jobs in eight years. Construction that peaked with 90,000 workers in 1984 last year employed about 58,000.

Jobs vanished. Offices emptied, then homes. Equity disappeared as people who had bought high sold low--if they could sell at all.

Half of Denver’s homes had FHA mortgages. The sight of the blue HUD “For Sale” signs sent shivers through neighborhoods, just as plague crosses next door had terrified medievals. A $75,000 condominium would not budge at $30,000.

“You see this house with a blue sign get sold for $20,000 less than your (mortgage),” said Charles Carter, a partner at Perry & Butler real estate, and “a lot of really good, upstanding people said the hell with it and stopped sending the (payment) checks.”

Aurora postman Bill Frazee, 35, bought two of those bargain units for a total of $49,300 last year, and rented both. When a HUD sign went up on the house next to his and was sold for less what the owner had paid for it, he said: “I figured what we lost on (equity in the house) we’ll make up in the condos.”

“Everything in Denver went wrong at the same time,” commercial realtor Don Kortz said. “Little things happened, like the Broncos lost two Super Bowls. We were stumbling over ourselves, shooting ourselves in the foot. . . . We had the mentality that things were going so hot, thinking that nothing would happen to stop it.”

That is why Denver feels so touchy about the S&Ls.; In a city as susceptible to fiscal moods as it is to weather, the mood now is “turnaround.” Drury has forecast “nothing fantastic, but slow and steady growth” for the next 18 months.

From where Pederson sits, though, “the mood here is still fairly sour. In 1985, our company was trying to convince clients things were not as good as they look. Now we’re trying to convince them they’re better than they look.”

Times researcher Ann Rovin contributed to this story.