Two downtown Denver developers are fighting over the future of the rundown Barth Hotel near Union Station: Should it be preserved as affordable housing for seniors, as is currently required?
Or should legal restrictions be lifted so the building can once again become a for-profit hotel?
Earlier this year, the building’s current owner, Senior Housing Options, moved out residents after an elevator broke. Unable to afford repairs, the nonprofit decided to sell, listing the 62-unit building for $2.5 million. The building has sat empty since.
Urban Ventures developer Susan Powers and the nonprofit Eaton Senior Communities had a plan to bring affordable senior housing back to the building. They went under contract to buy the Barth from Senior Housing Options. They came up with a financing package.
But there was another player in the deal: Walter Isenberg, the developer of Union Station. His company had acquired the “right of first refusal” for the building in 1995, guaranteeing them the opportunity to buy the property if it ever went for sale.
Isenberg and Cornerstone Oxford recently asserted that right, allowing them to match or beat the nonprofit’s bid — and the Eaton deal fell apart, as BusinessDen reported.
But Isenberg is in the hospitality business, not affordable housing. So he is now trying to convince Denver City Council to remove a covenant that mandates the building be used for affordable housing until 2080.
Isenberg’s proposal: Move the affordability restrictions to another site where more units could be built. His hope is that the Barth would generate tax revenue for the city as a hotel — and, of course, he would make a profit.
Cornerstone Oxford’s willing to pay more than Urban Ventures offered, and Isenberg argued the extra revenue could be used by Senior Housing Options to preserve the nonprofit’s current stock of affordable housing or to develop a new site.
He calls his proposal a “win-win.” His attorney has threatened legal action against the city if it does not remove the covenant, arguing he secured the first right of refusal long before the city established the affordable housing covenant.
Affordable housing champions – and city staffers – argue lifting an affordable housing covenant under any circumstance could undermine the city’s commitment to preserving affordable housing.
The current site at the Barth is an ideal building for seniors, Powers said. It’s close to public transportation and amenities. And it’s the right size for the purpose.
“This is the last remaining affordable housing for seniors in downtown,” Powers told Denverite. “And this is not shelter. It's efficiency units. It's permanent housing for them. And so, why is that not of higher value at this point?”
Isenberg says the affordability restrictions are improper.
Affordable housing covenants are often established in exchange for a public investment. In the case of the Barth, the latest 60-year covenant was established after the city gave Senior Housing Options a $162,000 loan for repairs in 2020.
The covenant “effectively” and “dramatically” decreased the value of the building and Cornerstone Oxford should have been notified, Isenberg said.
“The covenants from the city were put on improperly,” he said.
The city maintains that covenants are permanent, unmovable and legally binding. Whether the right of first refusal was established before or after an affordability covenant is immaterial, staff argue.
“Any buyer of the property would be subject to the covenant,” said Adam Lyons, the deputy director of housing opportunity, to Denver City Council members.
Though the deal with Powers’ Urban Ventures has fallen apart, she and her partners say they’re still eager to turn it into senior housing again.
Affordable advocates warn of ‘Pandora’s box’
Affordable housing developers fear lifting — or even moving — the covenant would establish a dangerous precedent where developers could buy their way out of affordable housing covenants.
“We need to prevent the loss of public investment,” said Diana Delgado, CEO of Eaton, in an interview with Denverite. “And we need to preserve community stability, to maintain that long-term affordability.”
Eliminating the restrictions would undermine the entire point of a covenant, she said.
“I feel like this would open Pandora's box, and that we could find ourselves in a situation where other owners and developers wanted to get out of the restrictions that they had agreed to at a certain point,” said Jennie Rodgers, vice president of Enterprise Community Partners. “We could see people displaced and moved out of areas of opportunity.”
Denver has never removed an affordable housing covenant, Powers said. Rodgers, who works nationally, is unaware of any city in the country having done so.
At-large Councilmember Sarah Parady worries about the unintended consequences of lifting the covenant.
“If we signal that we're willing to do that kind of thing, suddenly we're going to have folks looking to snap up these properties and play dominoes with us all around the city,” Parady told Denverite. “Frankly, we don't have the time and capacity to do that.”
But Isenberg said it’s worth considering as the city tries to bring life to downtown. He’s inviting council members on a tour of the building next week.
“As you all know, Oxford 2005 had a Right of First Refusal to acquire the Barth Hotel,” he wrote council members. “We have exercised that right and would like to have you join us for a tour of the Barth Hotel. Further, we will provide you with information related to our plans for the hotel.”
