Denholm's dead end
Office condo set up makes sale of key building next to impossible
The Denholm Building is in an impossible situation.
Not its location, 484 Main St. across from Worcester City Hall; that's pretty good. And as a key parcel in a city slated for a renaissance, it should be drawing the attention of buyers, right?
Not quite.
The Denholm Building - so named because it was once the home of the Denholm Department Store - is an office condominium, and its position in the commercial real estate market is about as bad as it gets.
The Denholm Condominium Trust, which oversees the building's operations, knows this and would love to be able sell the aging building, but it's stuck.
Carmelita Bello, CFO of the Colleges of Worcester Consortium, sits on the trust's board of directors.
"I'd love to hear that," she said of the prospect of a buyer for the Denholm.
Exodus
Owners are leaving the building faster than they are buying condos there. The trust hasn't sold a Denholm condo since mid-winter, Bello said.
The consortium has one office in two condos it purchased at the Denholm in 1998, but also maintains three vacant condos "gifted" to it last year by departing former owners, Bello said.
The trust itself is listed in city tax records as the owner of six condos in the Denholm, all but one or two of which are unoccupied, Bello said. There are 36 office condos in the building.
But selling the building outright requires the unanimous consent of all the property owners, Bello said. Not only is the likelihood of unanimity low, but any prospective buyer would have to purchase each condo from each separate owner. That would push the would-be purchase price of the building far beyond its actual market value, said Matt Mayrand, a broker with Worcester commercial real estate firm Kelleher & Sadowsky Associates Inc.
In its most recent transactions, the trust has sold condos, but credited back the purchase price, or a portion of it, to buyers to fit out their office space. And while condos are vacant, it's the trust that's paying all the fees and expenses, Mayrand said. On top of all that, the building is beginning to fall into disrepair, Mayrand said.
One of the very last buyers for a Denholm office condominium was Bagus Tjahjono of BT Enterprise Holdings LLC. Tjahjono moved from Boston to an office at the Denholm when he bought the Park Plaza building across the street.
He said he did entertain the thought of buying the Denholm. Briefly.
"It's a headache," he said. "We thought about it, but it's nearly impossible to sell the entire building, trying to convince everyone to move in the same direction."
No condo owner would want to be the first to sign an agreement with a developer who intends to take full ownership of the building, Tjahjono said.
Lease back
It's probably a better deal for current tenants to remain in the building as condo owners rather than sell and lease back their offices from a new owner who would have to get relatively high rents to make up for the high purchase price of the building, Mayrand said.
The type of tenants in the building could also make it difficult to buy the condos one at a time, Tjahjono said.
"There are a lot of nonprofits here" that are comfortable in the building, and don't owe any money on their spaces. "They don't really care about money," Tjahjono said. "For them it's not about the money." The prospect of leaving a paid-off condo and looking for new space to either buy or lease is not necessarily attractive. "It's difficult to go to them and ask them to sell for a number," Tjahjono said.
Tjahjono said the most anyone could hope to do would be to gain some kind of "majority control of the trustees and affect some change."
"It's a great area. It's in a great location; it's a beautiful parcel," Tjahjono said. "I don't know what they were thinking. Office condos have never worked."
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