Concrete jungle: Stalled development projects in Aspen, the valley

Rick Carroll and Scott CondonAspen Times WeeklyAspen, CO Colorado
Michael Faas/Aspen Times WeeklyConstruction is stalled at the former Stage 3 movie theater property in Aspen.

Driving through the midvalley en route to Aspen, one can’t help but notice the giant construction crater at Willits that might someday be a new Whole Foods Market. Across Highway 82 stands another once-stalled development project in the Shadowrock townhomes. Farther upvalley is yet another delayed development, Basalt’s Snow River Lodge; the jury is still out on whether it will ever be built.Aspen is suffering a similar blight, with projects such as the Stage 3 redevelopment, Dancing Bear Residences’ phase two and the Boomerang Lodge dead in their tracks. And don’t forget about Snowmass’ Base Village, the massive base area redevelopment that was to bring the resort back to life but is now facing foreclosure.Most developers blame their plight on the national economy, with the recession having dried up construction financing just as these projects were getting under way. Realtors agree, and note that it will be hard to kick-start construction and sales because of the ongoing slump in those sectors of the economy. And if the holes in the ground and the scaffolding reaching toward the skies are any indicator, they are correct. With that in mind, the Aspen Times Weekly decided to take an inventory of our valley’s craters and girders, and give a closer look to a few of the larger development projects still foundering.What follows is an update on where these would-be lodges, retail outlets, townhomes and more stand.

Location: 625 E. Main St., AspenDeveloper’s plan: For 20 years this Main Street property was home to the Stage 3 movie theater complex, until Dallas-based Aspen Main Street Properties bought it in May 2006 for $5 million from the Carmisch Brothers of Minnesota. In 2007, the new owner demolished the theater building with plans to redevelop the property into a 27,000-square-foot, mixed-use building that would include office and commercial space, along with five free-market condominiums, five affordable-housing units and 28 parking spaces. About 15 percent of the construction was completed before it was suspended in the winter of 2008. Alpine Bank began foreclosure proceedings in August 2009, claiming that Aspen Main Street Properties was delinquent on a $4.7 million loan.Status: The property is scheduled to be auctioned off Aug. 17 at the St. Regis Aspen Resort. The suggested starting bid in the auction, which will be hosted by Sheldon Good & Co., is $3 million. The auction comes after Aspen Main Street Properties filed for Chapter 11 bankruptcy protection in March, in an effort to stave off Alpine Bank’s foreclosure proceedings. To participate in the auction, suitors will be required to show up with a $300,000 cashier’s check. Those who can’t attend the auction in person will be allowed to make bids online. – Rick Carroll

Location: 225 N. Mill St., AspenDeveloper’s plans: The Dancing Bear Residences-Aspen was billed as a two-phase development. But only the first phase, located at the corner of Monarch Street and Durant Avenue, has been completed. Construction on the second phase, at the old Chart House location, stopped last year when financing dried up for owner DB Capital Holdings. The would-be 11-unit condominium project, located across Durant Street, “is nothing more than an incomplete steel structure which sits abandoned and blighted in the heart of downtown Aspen,” wrote one lender on the project, in court papers connected to litigation over the Dancing Bear. Status: The first phase remains open to guests and has a new general manager, Jeanette Schultz. Schultz was made GM after the project went into receivership, which was pushed by Aspen HH Ventures, an investor which pumped $6 million in the project and claims it has not been paid. The receivership, under the direction of James DeFrancia of Weston Capital Corp., is intended to wind up and liquidate DB Capital’s business and affairs. Yet nothing has come easily in this project. Earlier this year, DB Capital Holdings filed for Chapter 11 reorganization in an effort to stay out of receivership, but the judge dismissed the case. So in June, five creditors put DB Capital Holdings into involuntary bankruptcy, which is being contested by Aspen HH Ventures and Germany-based West LB, a lender that is reportedly owed approximately $50 million by DB Capital. Later this month, a federal judge is expected to rule on whether the involuntary bankruptcy will stand. And, in a related development, WestLB took steps to foreclose on the Dancing Bear last month. “This legal activity has no impact on the operation of the Dancing Bear Aspen project,” said Maureen Poschman, spokeswoman for the lodge, in an e-mail to the Times. “It is only related to the litigation and disputes among the partners.”- Rick Carroll

Location: 500 W. Hopkins Ave., AspenWhat the developer planned: The Boomerang Lodge property was acquired for $13.5 million from the Paterson family in 2005. The new owner, Virginia-based Fountain Square Property, received approval in August 2006 for redevelopment into 47 hotel units, two affordable housing units, six free-market units and sub-grade parking. But the developer, after razing much of the lodge in June 2007, pulled the plug on the project when construction financing dried up. Charles and Fonda Paterson had owned the Boomerang Lodge since 1956. During the hotel’s heyday in the 1960s, it was considered cutting-edge in design, and was featured on a full page of Life magazine in the early 1960s.Current status: While the property is not on the Multiple Listing Service, the owners would “probably sell the whole project for $14 million,” said Aspen broker Craig Ward, who has worked with the owners over the last few years. In August 2009, the owners received a three-year extension on the approvals, which will expire October 2012. “They’re really looking to sell the project,” Ward said. “I don’t think the project will get built with the existing configuration. Not only did they lose their construction financing, they lost it the process of the (U.S.) financial meltdown.”Ward said the right buyer could make the project successful.”The market here is being led by the high-end stuff. This is a great project for somebody with the horsepower that could buy it and start building. It’s nice to sell new condos; there’s a lot of buyers out there who don’t want to buy 10- or 20-year-old condos.”- Rick Carroll

Location: Snowmass VillageWhat the developer planned: Nothing has come easily with the project, one that was originally touted as the savior to the Snowmass economy when town voters approved the it in 2005. In 2006, New York-based Related WestPac acquired the project from Intrawest and the Aspen Skiing Co. Construction of the entire project – originally slated for 1 million square feet at the base of Fanny Hill – stalled in 2008 because of the credit crunch and the inability to secure financing for construction. So far, 400,000 square feet of building has been completed, including the Viceroy Hotel, which is up and operating.Current status: The entire project went into receivership in July as part of a court action spurred by four lenders, including Hypo Real Estate Capital Corp. of New York. The lenders claim that Base Village owes $386 million on a loan, as well as $48.5 million in other loan-related expenses. They’ve also taken steps to foreclose on the property. For now, all of Related WestPac’s finances are under the control of Destination Snowmass Services Inc., a subsidiary of Destination Hotels and Resorts, which runs several Snowmass lodges and is a division of Los Angeles-based Low Enterprises Inc. Related has maintained that it remains committed to the development and the community. – Rick Carroll

Location: Willits Town Center, just upvalley from the City Market in West BasaltDeveloper’s plan: Willits Town Center got an unusual approval as part of the settlement of a lawsuit. The deal allows for development of 362,000 square feet of commercial space and up to 138,000 square feet of free-market residential space. A centerpiece of the project is the Whole Foods Market building, with a 44,000-square-foot space for a supermarket. The specialty grocer was envisioned as the anchor tenant that would generate the traffic to make the remaining commercial space more lucrative. To date, about 65,800 square feet of commercial space has been developed along with 86 residential units. (The Willits subdivision is considered a separate project, and has different ownership.)Status: Joseph Freed and Associates (JFA), a Chicago-based development firm, acquired the project and started work on the Whole Foods building in 2008. Financing dried up in September of that year, after the foundation and infrastructure were completed. No progress has been made on construction for nearly two years, and the original contract with the supermarket chain expired. Whole Foods signed a new lease in March 2010 for a scaled down store of 25,000 square feet. Just one month later, Bank of America foreclosed on the project, contending that JFA defaulted on loans with $36 million still owed. Cordes and Company of Denver was appointed by a court as the receiver for the project, managing it until the ownership issue is settled. A foreclosure sale was scheduled for Aug. 25 but has been rescheduled to Sept. 15. JFA officials insist they will retain control of the project. A JFA spokeswoman has said the company is pursuing an agreement with Bank of America as well as alternative financing.Meanwhile, land-use approvals for the smaller supermarket must be in hand by early September, or Whole Foods can opt out of the lease. Bank of America gave the receiver a green light to seek those approvals. The Basalt Planning and Zoning Commission recommended approval of the altered plan on Aug. 3. The Basalt Town Council takes up the debate Aug. 10 and 24.In the best-case scenario, Whole Foods could open a market by late 2011.Mike Staheli, project manager for the receiver, warned at the planning commission meeting that there are hurdles to cross even if the land use changes are approved by the town.”It’s not a given this project is back on its feet,” Staheli said.- Scott Condon

Location: Next to Stubbies bar and restaurant, on the frontage road paralleling Highway 82 in Basalt.Developer’s proposal: Initial approvals for the project date back to the 1990s. The ownership group is on its third plan. In 2006, Jim Richmond earned town approvals that altered the project to a 48,000-square-foot, 54-unit condominium hotel with two affordable- housing units. He went back to the council this June and secured new approvals, as well as an extension of vested rights for a standard hotel with 60 units and three affordable housing units.Status:Richmond’s group poured the cement foundation of the lodge in early spring 2006, but they didn’t immediately pursue construction on the rest of the structure. Richmond said in meetings with the Basalt Town Council this year that financing dried up because of the recession. He hopes the new approvals and the extended vested rights for the project will make it more attractive to lenders. Richmond acknowledged to the council in June that finding the financing will be the tough part of the project.Basalt officials view the hotel as a potential business driver for shops and restaurants in town because it would be the first new tourist accommodation built in years. The hotel is expected to attract guests coming to Basalt for fishing or other outdoor recreation, and provide an affordable alternative for people visiting Aspen.If the hotel isn’t built, the town government has secured funds from the developer to restore the site, according to planning documents.- Scott Condon

Location: On the east side of the El Jebel commercial plaza, across Highway 82 from the City Market.Developer’s proposal: A development firm called Blue Ridge Investments Inc. acquired the property as well as approvals for 100 luxury townhouses from the original owners. The project was approved by Eagle County. Blue Ridge developed 30 units before its financing dried up and construction stalled in fall 2008.Dave Forenza, a developer and contractor from Edwards, Colo., purchased Shadowrock through his firm El Jebel Townhomes Borrower LLC on March 31 for $16.5 million. He said he learned of the availability of the project from Colorado Capital Bank in Edwards, which had worked with Blue Ridge Investments. The project wasn’t foreclosed on. Various parties declined comment on whether Blue Ridge was unable to make payments on its loans.Forenza’s total investment, with construction loans and other associated debt, is about $22 million, he said. His acquisition includes seven units that were built but not sold by Blue Ridge.Status: Shadowrock is one of the few big, private projects under way in the Roaring Fork Valley, and it is very visible off of Highway 82. Forenza said up to six subcontractors stop by per day looking for work, including some from out of the state.The exterior of a new building with five new townhouses is nearly complete. Forenza aims to finish them by the end of September. He said last month that construction costs are coming in even lower than he calculated when he bought the project on March 31.He is passing on the savings to try to spur sales. The five new units plus the seven existing units are being sold at prices ranging from the mid-$500,000s to the low $600,000s, depending on size. The highest sale at Shadowrock in the expensive old days was $1.1 million.Some observers in the real estate industry have questioned if Forenza will be the next casualty of the recession. They have said privately that they doubt he can recoup his investment.Forenza is unfazed by the doubts. The low construction costs are the key. Both labor and materials came in below budget because suppliers and subcontractors are fiercely competing for the little amount of work that exists, he said.Forenza also said he is willing to accept less profit than people in the construction industry were accustomed to getting in the mid-2000s. The days of the industry raking in profits are gone for the foreseeable future.”You’re not going to walk away from a project with a retirement check anymore,” he said.The pace of sales of the new units will determine when work starts on the next townhouses. Several other foundations were poured by Blue Ridge before construction stalled.Chaffin Light Real Estate was the listing broker for the project.- Scott Condon