Developer Zack Davidson is President and CEO of the company that plans a low-impact, but profitable, development of the 994-acre Hideout Lake community near Telluride.

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Zack Davidson, the developer of the Landmark condominium and retail project in Greenwood Village that became embroiled in one of the largest and most highly visible real estate bankruptcies in the Denver area in recent years, has re-emerged as a top executive of a California-based firm that says its mission is to provide attractive returns to wealthy investors, while protecting, preserving and improving pristine property.

Davidson, who filed for personal Chapter 7 liquidation of his assets in Denver bankruptcy court almost exactly two years ago, is now the President and CEO of the Earthkeeper Alliance. A call to the company, seeking an interview with Davidson, has not been returned.

Not broadcasting bankruptcies

The biography of Davidson on the company’s website did not mention the Chapter 11 bankruptcy of the Landmark project that included two condo towers and the Village Shops at the Landmark in 2009, nor his personal bankruptcy in February 2010.

His personal bankruptcy listed $164.6 million in liabilities and $141.3 million in personal property. His real property included a house at 820 Gaylord St. His bankruptcy filing said he rejected an offer to sell it for $2.1 million. Last March, it sold in a short sale for $1.875 million. The largest claim in his Chapter 7 liquidation bankruptcy was $90.66 million owed to Hypo Real Estate Capital Corp. that  made a construction loan on the Landmark and had been personally guaranteed by Davidson.

Zack Davidson't former Denver home was sold in a short sale.

During the frothy real estate market of early 2007, Davidson threw parties promoting the Landmark that Realtors at the time compared to something out of Cirque du Soleil. Guests dined on chateaubriand, veal scallopini and lobster salad and he handed out lavish gift packages to guests. He later boasted that he would spend $1.7 million throwing a party.

Davidson’s biography on the Earthkeepers’s website said that for the past 13 years he has served as President and CEO of Everest Development Co. and Eikon Investments, with offices in San Francisco, Denver and Dallas.

The bio of Davidson goes on to say that those “diversified real estate development companies have acquired, entitled, developed and redeveloped nearly $1 billion of extremely complex and diverse real estate assets throughout the western United States.”

“Un-developer” developer

It does not say when Davidson joined the privately held Earthkeeper Alliance, headed and founded by Adam C. Hall. In 2007, Hall, who had previously made millions of dollars in real estate, began to “acquire large tracts of land for conservation and un-development,” according to the company’s website.

The firm’s goal is to do well by doing good.

Its mantra is to “conserve, protect and restore,” pristine land, keeping it from being over-developed. It says there are millions of acres in the U.S. that could benefit from those three principles.

Its brochure is filled with aphorisms such as:

• We are committed to leaving the world a better place.
• We honor both those that came before us and those that will follow.
• We are guardians and custodians of our time.
• Our endeavor is to create a Legacy that endures for many generation.
• It is not just about what we leave behind, but what we give forward!

In Colorado, it said it has Hideout Lake, between Montrose and Telluride, under contract.

$1 million minimum

It take a minimum investment of $1 million to participate in what is called Earthkeeper Legacy Fund I, which will buy and sell  the 994-acres Hideout Lake.

Development drawing for Hideout Lake.

Alternatives for the land include creating 50 “family compound ranches” with an average size of five acres each, distributed throughout the property, with shared access on 744 acres that will be conserved. It also said it will develop a ‘world-class” amenity program that will include fly fishing, cross-country skiing, an equestrian center, a clubhouse with pool and spa, mountain biking, ski cat, hiking, white water rafting, lake fishing, hunting, mountain climbing and spelunking.

Documents obtained by InsideRealEstateNews, show under that development scenario an investments is projected to provide a “preferred return” of 8 percent per year and a projected investor internal rate of return of 27.1 percent. The projected total return is 63.4 percent, with a projected holding period of three years. Some 65 percent of the profit splits beyond the preferred returns would go to the investors and 35 percent to the sponsor. The sponsor management fee is 2 percent per year and would invest 3 percent of the total capital. The fund is expected to be in place for seven years.

In keeping with the company’s ethos to tread lightly on land, its proposed development is far less than the 284 single-family home lots, 91 “cabin” sites, and six “estate” lots entitled to be built on the property.

Earthkeeper’s documents say it is scheduled to close on Hideout Lake on April 1. The acquisition price is  $5.7 million and the total project cost is just under $11.2 million, if it is developed.

Another alternative is to sell the entire property as a “single legacy ranch” with defined places construct buildings. It estimated it can sell the property as a ranch with a minimum of $10 million with a 3 percent cost of sale. Under this option, the total investment internal rate of return to the investor group is expected to be 20.2 percent.

“A third option always exists in that  we can sell the entire property to a land trust,” the firm notes. “We have not modeled this option, but in light of the market comparable s and the severely distressed pricing we have secured, we are confident that selling to a land trust would result in a return in the low teens.”

Horseback riding by Hideout Lake.

Map showing Hideout Lake

Earthkeeper said that $43 million already has been invested in the property, which had been operated as a working ranch until Pacific Development bought it in 2004 and “began the lengthy entitlement process for a large golf course.” A Jack Nicklaus signature golf course was planned on the property, 9,000 feet above sea level with panoramic views of the San Juan Mountains. In 2008, the property was appraised at $121.85 million. The discounted present value of the property is now $74.63 million, according to Earthkeeper. The $120 million Cornerstone Club, with a Greg Norman golf course, is within walking distance of Hidden Lake.

In the 1800s, Hideout Lake was occupied by the Ute Indians and the Tabeguache tribe.

Earthkeeper has identified 136,700 acres of “additional opportunities” in 15 states with a total ‘transaction size” of $213 million. Those opportunities include 2,200 acres for $10 million in Colorado.

Contact John Rebchook at JRCHOOK@gmail.com

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• Landmark moves to Ch. 7 Bankruptcy
• General contractor and subcontractors protected at Landmark/Meridian
• Hypo commits another $30 million to Landmark
• Landmark plans to reorganize, not liquidate
• Landmark developer updates bankruptcy

It’s the final chapter for six Borders in Colorado. As part of its bankruptcy filing on Wednesday, the once-mighty bookstore chain said that it will close its store in Southwest Plaza and five other places in Colorado. The closings could cost more than 100 employees their jobs. A person who works at one of the bookstores, who is not authorized to speak to the press, told InsideRealEstateNews that a typical store employees between 20 and 25 people.

Closings: Littleton to Dillon

The stores being closed in Colorado range from 12,500 square feet in Dillon to 28,000 square feet for a store in Arapahoe Crossings in Aurora. Together, they cover 129,658 square feet – about twice the size of many King Soopers, but about half the size of many Super Walmarts. The Colorado stores account for 3 percent of the approximate 200 stores the chain plans to close. Reorganization under Chapter 11 of the federal bankruptcy code allows Border to get out of onerous leases. Borders listed assets of $1.28 billion and liabilities of $1.29 billion. It’s planning to close about 30 percent of its stores nationwide.

City	Address	Size in square feet
Littleton	8501 W. Bowles Ave.	23,335
Boulder	1750 Twenty Ninth St.	22,000
Aurora	6606 S. Parker Rd.	28,000
Greeley	2863 35th Ave.	23,223
Grand Junction	2464 U.S. Highways 6 and 50	20,600
Dillon	2264 Dillon Road Way	12,500

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The Landmark in Greenwood Village is heading into Chapter 7 bankruptcy liquidation.

The Landmark, a high-profile European-style high-rise condominium and entertainment  project, mired in Chapter 11 reorganization bankruptcy for the past 15 months, today is moving to Chapter 7 liquidation.

That will allow the two-tower luxury condominium project along Interstate 25 near Belleview Avenue to be taken over by its lenders in foreclosure actions, and exit bankruptcy.

“Most people see foreclosures as something negative. But in this case, it is very positive,” said Andrew S. Miller, managing principal of Miller Frishman Group, who, in a separate state court receivership action in Arapahoe County District Court was appointed as the receiver. “This will serve to extricate it from bankruptcy through the foreclosure process. This is a major step forward in returning Landmark to normalcy. This is decidedly the best option for the property. It will enable the property to emerge from bankruptcy and to begin to normalize the operation”

He said the consortium of lenders on the project will almost certainly be able to take control of the property through foreclosure action.  He said the total is debt is north of $100 million. While it is conceivable someone other than the banks will bid on the property at a foreclosure auction, Miller said that is highly unlikely. Hypo Real Estate Capital of Germany was one of the main lenders on the European-styled complex, providing a $182 million construction loan.

Landmark’s developer, 7677 East Berry Associates LP, filed for Chapter 11 reorganization in August 2009. Its developer, Zachary Davidson, filed for personal bankruptcy in February.

Restructuring hammered out

Miller, as the court-appointed executive in charge of the project (initially as the “chief restructuring officer” appointed by the U.S. Bankruptcy receiver), and creditors worked with the developer over the past five months in an attempt to derive an acceptable restructuring plan. Today’s action opens the way to liquidation of the developer’s assets and to emerge from the bankruptcy process.

No impact on owners

Asked what this will mean for the current owners and tenants, Miller said: “Absolutely nothing. It will have no impact,” at least in any negative sense, he said. But once the process is complete, which Miller estimated might take four or five months, it will make it easier for any decisions to be made on improvements, maintenance, warranty work and should help future sales, he said.

The Landmark includes two residential tower, The Landmark and The Meridian at Landmark. It has a total of 271 units, of which 147 have been sold. Available units are priced from less than $500,000 to about $2 million. The 170,000 square feet of the Landmark’s retail, dining and entertainment space is about 80 percent occupied. Tenants include the Landmark at Greenwood Village Theatre, Comedy Works and Ted’s Montana Grill.

For homes available in the Landmark, check out Landmark COhomfinder.com and Meridian COhomefinder.com

Contact John Rebchook at JRCHOOK@gmail.com.

Related Posts:

• Bankrupt Landmark developer back in real estate
• General contractor and subcontractors protected at Landmark/Meridian
• Hypo commits another $30 million to Landmark
• Landmark plans to reorganize, not liquidate
• Landmark developer updates bankruptcy

At the heart of the matter is an additional $30 million that  developer Zachary Davidson’s group is poised to get from its main lender, Hypo Real Estate Capital Corp., the subject of an earlier InsideRealEstateNews.com blog today. Davidson’s group, 7677 East Berry Avenue Associates L.P., already is on the hook to Hypo for more than $90 million. The additional $30 million in debtor-in-possession financing would be instead of $15 million in DIP financing from Carmel Partners in San Francisco, which Davidson had announced soon after filing for Chapter 11 reorganization bankruptcy on Aug. 30., citing $168 million in assets and $116 million in liabilities.

“We opposed (the DIP financing)  at first,” said Thomas C. Bell, a partner with Denver-based Davis Graham & Stubbs, who represents the general contractor, Dallas-based Beck Residential LLC, and 26 local subcontractors. The subcontractors have claims ranging from $1,000 to $200,000.

“Our mechanic liens would have been wiped out,” under the initial debtor-in-possession, or DIP, financing agreement, Bell said today. “Should Hypo have chosen to foreclose, all of our concerns would have been wiped out. We are definitely now in better shape. ”

If Davidson’s group was to default on the DIP financing and Hypo chose to foreclose, it would have only needed to bid the amount it was owed, whether it was $10 million or $30 million, and that would have left no money available to Beck and the subcontractors, Bell explained.

Instead, Hypo has agreed not to place its repayment of the $30 million ahead of the money owed to the subcontractors, although the exact amount they will be paid still has not been determined.

“I think it was as good as we were going to get,” Paul Higgins, managing director of Beck Residential told InsideRealEstateNews.com last week.  Higgins, however, said he would have preferred that the court had specified the amounts the workers would have been paid. Instead, that will be determined at a later time.

In a colorful phrase called the “Liquidation Waterfall,” court documents spell out what will happen to the mechanic liens in the event of a default and foreclosure. As part of the terms of the liquidation waterfall, Hypo would “pay in full all undisputed Mechanic’s Lien Claims (including interest to the extent by law),: and would escrow the full amount of all disputed mechanic lien claims.

“To be clear, the DIP Lender will not cause a foreclosure sale or otherwise cause the conveyance or liquidation on terms that will defeat this Liquidation Waterfall, including by restricting the funds available for distribution to the Mechanic’s Lien Claims,” according to court documents.

Also important, Bell said, is that the court set deadlines for filing objections to claims by three of the main players – Beck, Environmental Landworks and Milender White Construction. Anyone filing an objection needs to file a “proof of claim”  by Nov. 30 and they must be “filed and served” by Jan. 25, which the court said will expedite resolutions.

Typically, a general contractor is paid by the developer, who then pays the subcontractors. At the Landmark/Meridian, the general contractor, Beck, had a clause in its contracts with the subs saying that if it did not get paid, the subs would have no claim against Beck.

Since Beck has not been paid, lawyer Bell said the subs, who along with Beck have filed mechanic liens of about $3 million on the project, would have had a difficult time collecting from Beck. Davidson, who did not immediately respond to a request for a comment, is disputing some of the claims. Still, Beck wants to protect the rights of the subs and see that they are paid, said Bell, who in addition to being a lawyer is a certified civil engineer.

In addition to Beck, Land Title and Environmental Landwork, others who have  filed mechanic mechanic liens include Blue Architects, Buchanan Yonushewski Group, Code Fire LLC, Colorado Comfort Products and Dal Tile.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

Related Posts:

• Hypo commits another $30 million to Landmark
• Landmark plans to reorganize, not liquidate
• Landmark developer updates bankruptcy
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The $30 million in what is known as debtor-in-possession financing, would be instead of the $15 million it had been negotiating with Carmel Partners of San Francisco, as previously reported by InsideRealEstateNews.com. The money, similar to a construction loan, will be used to complete work on the project, so units can be sold and the funding can be repaid.

Hypo, however, is providing not only more money, but at a better interest rate for the developer, than Carmel had proposed, according to court documents. The $30 million, which will be  drawn down and repaid by condominium sales, if all goes well. If not, Hypo would have the option to foreclose, according to attorneys familiar with the situation.

Developer Zachary Davidson’s group can draw down no more than $10 million at a time, which is then paid back as soon as possible, according to attorney Thomas C. Bell, partner of Denver-based Davis Graham & Stubbs, who is representing the general contractor, Dallas-based Beck Residential LLC , and subcontractors on the project.

Last week, Bell won an important court decision providing safeguards for Beck and 26 local subcontractors who have filed mechanic liens for work they said was performed, but which they have yet been paid by Davidson’s group.

Davidson’s development group,  filed for reorganization under Chapter 11 Bankruptcy on Aug. 30,  citing $168 million in assets and $116 million in liabilities. Neither Davidson, nor his lawyer could immediately be contacted for comment. Davidson’s group currently owes slightly more than $90 million to Hypo.

But according to the 44-page order by U.S. Bankruptcy Court Michael E. Romero, Davidson’s group could find “no credit available on more favorable terms,” than that offered by Hypo.  Davidson, the debtor, “has been unable to obtain unsecured credit,” and does not have “sufficient available sources of working capital and financing to operate its business or maintain its property in the ordinary cause of business,” according to bankruptcy documents.

Carmel is entitled to a $300,000 break-up fee “in the even that the Court approves any other post-petition financing,” for the debtor, which is Davidson’s group, 7677 East Berry Avenue Associates L.P., according to documents.

Still, Davidson’s group has determined that the Hypo financing:  provides it with the “best opportunity to rehabilitate and complete construction”; more favorable pricing and terms than the Carmel loan; and presents a better opportunity for obtaining consensus among the debtor’s stakeholders, according to bankruptcy court documents.

Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.

Related Posts:

• General contractor and subcontractors protected at Landmark/Meridian
• Landmark plans to reorganize, not liquidate
• Landmark developer updates bankruptcy
• Q&A on The Landmark Bankruptcy
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Indeed, the Landmark remains “open for business,” Davidson said in a letter to Realtors.

“Unlike some developers that have declared Chapter 11 reorganization and subsequently ended up in Chapter 7 liquidation, The Landmark has a strong asset to liabilities ratio,” Davidson wrote in a recent letter to Realtors. He also sent a letter to residents and tenants at the Landmark along Interstate 25 near Belleview Avenue, as I reported in an earlier blog.

Davidson said that his bankruptcy is different than other high-profile bankruptcies in the Denver area, such as Village Homes and McStain Neighborhoods.

The company is reporting $168 million in assets and $116 million in liabilities, some of which it is disputing.

Here is a copy of Davidson’s letter to Realtors:

We value our relationship with Realtors and believe it is important to keep you informed on the Chapter 11 reorganization filing for The Landmark

Since we entered into the reorganization on Aug. 30, our team has been working diligently through the many legal steps associated with the filing.

While it is early in the process, the court is making decisions that we believe your buyers might be interested in knowing about, and The Landmark team is pleased about.

Judge Michael Romero granted our motion for the interim use of cash collateral to continue day-to-day operations at the community. This is good news for the community since it assures visitors and residents that we’re continuing with the first-class service and maintenance of the residential towers and the retail shops. Your clients will see the beautiful streetscapes, stylish storefronts and immaculate lobbies and amenities that are the trademark of of our community.

The next important step in our reorganization is securing post-petition funding for operations.

Our hearing about funding is set for Oct. 1. We have a fully executed loan agreement with Carmel Landmark LLC for a loan of up to $15 million. This is known as a Debtor-in-Possession (DIP) loan and the use of proceeds from this loan will provide capital for all ongoing operations and will pay for costs associated with the reorganization.

The lender is an indirect subsidiary of Carmel Partners III, LLC, a prominent $700 million real estate investment fund headquartered in San Francisco with offices around the country, including Denver.

Denver-native Ron Zeff founded Carmel Partners in 1992 serves as Carmel’s CEO today. When approved by the court, the new lending facility will provide enough capital to complete all remaining construction in the development, as well as provide funds to pay for the day-to-day ongoing operations of the Homeowners Association, the retail center, and the costs necessary to market the residential and retail.

Just this week we filed a complete set of financial statements with the court that demonstrate our financial viability.

In the Summary of Schedules, we reported assets of $168 million and liabilities of $116 million, including $15 million of unsecured creditors, some of which is disputed. Unlike some developers that have declared Chapter 11 reorganization and subsequently ended up in Chapter 7 liquidation, The Landmark has a strong asset to liabilities ratio.

Each re-organization is unique, and ours is vastly different than what your clients may have read about with other local builders, including Village Homes, McStain or John Laing Homes.

The Landmark community is completely finished on the outside and there is only interior customization work left to be done in residences at the two towers and in some of the retail space. The Landmark remains financially viable, which is why Chapter 11 protection has been granted by the court.

We have a full schedule of Court activities in the weeks ahead, including the first creditors meeting and the hearing regarding the post-petition funding, however, it is important for us to bring to the Court a motion asking for approval to close homes that are under contract.

We have 23 buyers under contract and one reservation, all of whom are anxious to move into The Landmark and The Meridian. We understand from our legal counsel that is very typical for judges in Colorado to grant the motion to close homes because it is in the best interest of all parties to generate sales that inevitably allow the loans related to the partnership to be paid off.

We have also received the approval of Hypo (our largest creditor and primary lender) to begin closing units again, which will be looked upon very favorably by Judge Romero. We are hoping to be able to start closing residences again in October and move new homeowners into our community.

Homebuyer deposits are held at Land Title, (Editor’s note: a co-sponsor of InsideRealEstateNews.com) and are not exposed to any risk of any kind during the Chapter 11 proceedings.

This is important because you can be assured that the deposits are not put into our general operating funds but are separated and secure at Land Title. These funds are not at risk and if your buyer contracts on a home at The Landmark, their deposit would also be placed with Land Title.

Let us just assure you that The Landmark is open for business.

Our retail shops are over 80 percent leased and we continue to have strong interest in the remaining available retail spaces and the available condominium homes. Don’t be hesitant to bring your prospects to our community. FHA and Conventional financing is available for residences at The Landmark at current market rates and with standard down payments.

Your buyers will love our extensive amenities, including concierge services, rooftop spas and decks, infinity-edge swimming pool, spectacular mountain views, state-of-the art fitness centers, wine cellars, private dining rooms, private movie theater, art studio and much more.

The brokerage team of Rike Palese and Katie Everett from Re/Max Professionals, Classic New Homes, has onsite staff to answer all of your questions. Please visit our sales center, open regular hours of Sunday and Monday from 11 am to 6 pm, and Tuesday through Saturday, 10 am to 6 pm. If you have questions, please contact Rike Palese at (303) 552-5550.

Regards,

Zack Davidson

CEO and President

Contact John Rebchook with real estate news at JRCHOOK@gmail.com or 303-945-6865.

Related Posts:

• Landmark developer updates bankruptcy
• General contractor and subcontractors protected at Landmark/Meridian
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The condominium portion of the Ritz Carlton in downtown Denver is in foreclosure.

High-rises in downtown Denver, such as One Lincoln Center, have struggled, as have troubled condominium high-rises in the Golden Triangle built by former Denver developer Craig Nassi.

“Quite frankly, I’m not sure Denver is a high-rise town,” said Tom Cryer, a broker with the Kentwood Co. Cryer noted that in the 1980s, the Waterford high-rise condominium project in Englewood  suffered, and future phases of the tower were never completed. And some high-rise towers along Cheesman Park suffered from poor sales int he 1980s, he said.

Glut of high-rise condos?

Last week, I asked Mike Rinner of the Genesis Group if the metro area is facing a glut of high-rise condos, especially in light of the 42-story, 496-unit Spire poised to open in downtown Denver.

“A glut? That’s an interesting way to phrase the question. I’m not sure I would phrase it that way,” Rinner said. “Obviously, there is an over-supply for the demand out there. The supply exceeds the demand, which is a classic definition of an over-supply.”

Rinner said he does not think another high-rise residential project will be built in the Denver area after the Spire.

“I don’t see another one coming on after the Spire,” he said. Even if a developer was brave, or foolish enough, to tackle one, it’s unlikely he could get construction financing in this environment.

Denver not a high-rise market

Chris Mygatt, president of Coldwell Banker Colorado, said that Denver does not have the history of high-rise living, like other cities in the country.

“Clearly, it is not a deep is not a deep market for us,” Mygatt said.  “It’s allure is that it is fun and it is exciting. It also appeals to a fairly narrow band.”

Mygatt said that one reason is that we are not constrained by land, such as a New York or San Francisco.

“One of the problems (for high-rises) is that we have too much land here,” Mygatt said. “In Manhattan, you are used to and learn to live vertically. But we’re not a Chicago, Manhattan, or Miami, Fla.” And even those areas are struggling because of over-building and lack of demand and financing.  Mygatt was recently in Florida and saw a high-rise condo project that was only 20 percent sold. “How do you keep the doors open at those levels?” he wondered.

Interesting enough, Rike (pronounced Rick) Palese,  the listing agent for the Lanmark, does not necessarily disagree with these assessments.

“It is definitely a small percentage of the market,” in the Denver area,” Palese, of RE/MAX Professionals/Classic New Homes, told me last week. “We are not a New York, San Francisco, Atlanta, or Chicago. ”

High-rises spread out

Still, the saving grace is that the high-rises are geographically spread out, he said. There are only a handful of high-rises along the southeast corridor, with others in the central business district and in the Golden Triangle. And the Pinnacle, as the only high-rise along City Park, has been bucking the trend, with strong sales.

Despite the bankruptcy, and the small market for high-rise living, Palese believes there are “enough people who wnat the “lock and leave lifestyle,” to make the Landmark a success.

Most of the buyers, as expected, have been coming from large single-family homes in Greenwood Village and Cherry Hills. A few have also come from big homes to the south,  such as Castle Pines Village, he said.

“We’ve also had some buyers from other condos in Cherry Creek North and LoDo,” Palese said. “There are people who may have already sold their big, suburban single-family homes to move downtown or Cherry Creek North. They like condo living, but now they want to live some place that is a little less congested and noisy.”

Contact John REbchook at JRCHOOK@gmail.com or 303-945-6865.

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