The entity that owns high-profile condominium towers, The Landmark and The Meridian in Greenwood Village, and the Village Shops, filed voluntary petitions for protection under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court in Denver.
The company will continue with sales and operations of its residential towers, as it restructures and extends its existing financing, and retailers will continue operations as usual at The Village Shops at Landmark.
The Chapter 11 reorganization filing does not include the separately-owned European Village of Homes, a 13-acre, 216-unit master-planned community just to the south of The Landmark, near Interstate 25 and East Belleview Avenue, slated to be built as part of the second phase of the project.
Since opening in May 2008, 139 condominium homes have been purchased at The Landmark and The Meridian, totaling approximately $95 million in residential sales.
And more than 80 percent of the 185,000 square feet of retail space in the The Village Shops has been leased. to restaurants, retailers and entertainment venue.
In the past three months alone, four new retailers and restaurants totaling nearly 13,000 square feet have made lease commitments for available spaces at The Village Shops.
“We are grateful to the Denver community for its tremendous support of The Landmark community over the past four years,” said Zack Davidson, president and chief executive officer of Everest Development Company, the developer of The Landmark, and sole manager of EDC Denver I, LLC, the general partner of 7677, the Landmark’s ownership entity that filed for bankruptcy.
“This support has led to continued success even through the downturn in the economy and more specifically, of the residential home market.” Davidson continued. “We regret that certain challenges, including financing issues with the project’s senior lender, Hypo Real Estate Capital Corp. combined with the local and national slowdown of residential home sales, and the inability of our buyers to sell their existing homes and obtain financing for their new homes here at Landmark, have unfortunately impacted our cash flow and made reorganization our only option.
“Even with the project’s continued success, the ownership group has run into a problem that is unfortunately far too common in today’s economy – a financially-distressed lender that is unwilling to provide us with a short-term loan extension in order to facilitate an orderly repayment,” he added.
7677 has assets with a current value of approximately $165 million, and debts totaling $100 million, including $93.8 million in secured construction debt with Hypo Real Estate Capital Corp.. Since 2008, 7677 has repaid Hypo approximately $90 million toward its $182 million construction loan, resulting in a current outstanding balance of $93.8 million. In 2007, Hypo pulled financing for another high-rise project, the Spire in downtown, which is being developed by the Nichols Partnership. That stalled construction of the Spire for several months and sent Randy Nichols, owner of his namesake company, scrambling to find other financing.
Hypo is a New York-based real estate lender that is owned by the German financial institution, Hypo Real Estate Holding AG In June of 2009, the German Financial Markets Stabilization Fund (SoFFin) acquired a 90 percent stake in the share capital of HRE, effectively nationalizing Hypo. HRE reported a loss of $1.13 billion Euros for the first six months of 2009.
“Over the last several months, the ownership group has repeatedly requested a formal extension of our loan with Hypo, which matures in November,” Davidson said. ” Hypo has consistently indicated a complete unwillingness to renew the loan for even a few months unless we agree to bulk sales of unsold condominiums and a substantial discount on all unsold residences. Either of these options will have a hugely negative impact on the value of our existing homeowners’ property, and will eliminate the chance of returning the invested capital to the other stakeholders in the property,” said Davidson.
Under Chapter 11, which provides a legal mechanism for the court-supervised reorganization of a company’s obligations, 7677 will seek to restructure and extend its existing construction financing with Hypo. The company’s immediate focus is operating the development in the same first-class manner and working toward a reorganization plan with the court and creditors centered on the restructure and extension of the existing Hypo debt. As with all Chapter 11 proceedings, 7677 must submit its reorganization plan within 120 days of filing. Once the Court and creditors accept the plan, it can emerge from Chapter 11 status. Creditors and other interested parties can access any court documents to obtain information on the case as it progresses.
“We are committed to working diligently to emerge from Chapter 11 as quickly as possible. In the meantime, we want to assure our residents, retailers and patrons that our goal is to protect the tangible and intangible assets of this community, including our brand as the premier mixed-use development in South Denver. Visitors to The Landmark, who come to enjoy our many restaurants, see a movie, visit Comedy Works, have a cup of coffee, shop, or visit friends who live here, will enjoy the same quality experience,” Davidson added.