Klaus coughs up big bucks
Klaus Obermeyer is willing to go to nearly any financial extreme to move forward with his latest project – Obermeyer Place – in the wake of Aspen Valley Hospital’s decision to withdraw as the anchor tenant.
Obermeyer is using $2 million of his own money to guarantee the groundbreaking scheduled for next month.
The development, located on Rio Grande Place across from Rio Grande Park, will include a mix of free-market and affordable housing, a variety of commercial spaces and 200 parking spaces. Once completed, Obermeyer Place will cover 200,000 square feet on 2.5 acres.
The project was approved by the Aspen City Council in April 2003. Construction will begin in early May, with a completion date set for summer of 2005.
The hospital pulled out of the project earlier this month due to financial woes, leaving Obermeyer Place hanging in the balance with no tenant for approximately 9,000 square feet of medical office space, 6,000 square feet of medical file storage and 36 parking spaces.
The unexpected vacancy caused an economic crisis for the project. Obermeyer Redevelopment Co., the company formed to lead the project, was scheduled to sign on its construction loan with three banks – Alpine Bank, Community Bank of Aspen and a Chicago-based bank – in mid-April, just a few weeks after AVH announced its pullout.
Without the anticipated revenue from what was going to be the project’s largest single tenant, the banks were reluctant to move forward with the loan set at approximately $45 million, according to Obermeyer Redevelopment spokesman Ben Gagnon.
The company had just two options for securing the loan: add more residential units, which could take months for approval, or guarantee the lost revenue in some other way.
Obermeyer Redevelopment decided to move on both tracks: Klaus Obermeyer loaned the company nearly $2 million to serve essentially as a bridge loan, and the company is asking the city of Aspen to allow two more residential units.
While AVH’s withdrawal has caused a headache for Obermeyer, he said he understands their reasons for pulling out of the lease, which had yet to be formalized.
“It looks like [AVH is] hurting right now,” Obermeyer said. “Maybe it was also a good thing they got out now rather than being halfway through the project and then we find out they don’t have the money to meet the obligation.
“It was early enough for us to adjust.”
Obermeyer Redevelopment will ask the City Council for permission to slightly expand the project while maintaining the core concept. There are currently 21 free-market units and 21 affordable-housing units approved; Obermeyer Redevelopment would like to add one unit to both of those components.
“The free-market units have always been the major financial driver,” Gagnon said Tuesday. “Any additional free market will help us restore fiscal balance to the project.”
Gagnon added that while free-market space is the money maker, Obermeyer has sought to maintain a balance between free market and affordable housing since the beginning.
The additional units are expected to cover the cost of losing AVH as a tenant. Gagnon also said the 6,000 square feet of storage space would likely not be built as result.
The Obermeyer Place COWOP task force will review Obermeyer’s request for additional units before making an official recommendation to the City Council in June.
COWOP (Convenience and Welfare Of The Public) task forces comprise city officials, citizens and other “stakeholders” who review large projects. The task forces are appointed by the City Council on a project-by-project basis.
Gagnon said he hasn’t even thought about what Obermeyer Redevelopment will do to make ends meet if the additional housing units are not approved.
“I’m not even going to anticipate that,” he said. “Right now I’m trying to pull together a proposal for an amendment.”
But Gagnon said no matter what happens, the project will maintain its original concept and principles – affordable housing and free-market units.
Obermeyer is optimistic that the council will approve the amendment.
“I think there’s a good chance,” he said. “It seems fair, and it makes some sense.”
Steve Benson’s e-mail address is email@example.com
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