The Highmark development sits vacant at the corner of AprÃs Ski Way and Village Drive in Steamboat Springs on Thursday.

Photo by Brian Ray

The Highmark development sits vacant at the corner of AprÃs Ski Way and Village Drive in Steamboat Springs on Thursday.

Highmark developers sue buyers

Steamboat Ventures: Purchasers' failure to close a breach of contract

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— Steamboat's troubled The Highmark luxury condominium project appears to have hit another in a string of impasses that have left the six-story building unoccupied more than four years after its groundbreaking.

Developer Steamboat Ventures Ltd. has filed a lawsuit in Routt County Court seeking to find seven condominium purchasers in breach of contract. However, the attorney for the defendants says Steamboat Ventures is attempting to force his clients into default so they can reclaim the units and market them at the higher prices now prevalent in the Steamboat market. He added that the developers also seek to keep more than $100,000 each buyer put down in earnest money.

"The buyers (defendants) I represent executed contracts under favorable terms at a time when the developers needed pre-sales in order to secure pre-construction financing," Fort Lauderdale, Fla., attorney Bart Houston said. "Now (the developers) want to terminate the contracts and retain the earnest money. They've told us they're not going to deliver the units."

Despite the lawsuit, there were signs of activity at the building near the base of Mount Werner this week. Construction workers were laying stone flooring in the lobby and preparing to finish the health club and owners' club. People on those jobs said they've been told the Highmark soon will be managed as a hotel.

The contracts that are the crux of the lawsuit have an aggregate value of almost $9 million. Contracted purchase prices began at $1.05 million and went up to $1.478 million. With the luxury One Steamboat Place coming out of the ground across the street, all of them have realized substantial equity prior to closing on their units.

Houston said it's apparent to him that the developers have seen Steamboat's real estate market rise substantially and don't want to close the sales at out-of-date prices.

That matter is set to be resolved in a three-day trial in May 2008.

"We had mediation in Denver (on Nov. 29), but it wasn't fruitful," Houston said. "But both sides agreed to leave that door open."

The Highmark is at the highly visible corner of Apres Ski Way and Village Drive, across the street from Snowflower condominiums.

A Steamboat Springs Realtor says although he has listing contracts on three Highmark units, he has been unable to market them.

"I can't get in the building to show them," Larry Perry of Coldwell Banker Silver Oak said. "I'm locked out."

Steamboat Ventures negotiated a $20 million promissory note secured by the assets in October 2005, which extended the original construction loan until Oct. 30, 2007. Integrity Bank of Alpharetta, Ga., holds the promissory note.

Steamboat Ventures shares members with Los Angeles real estate development firm Concord Wilshire Partners. Steve Sirang is a principal in both entities. He has consistently declined to return phone calls from the Steamboat Pilot & Today.

Sirang was not the original developer but was taken on as a general partner with Richard Friedman when the latter was trying to restart the project. Sirang's Los Angeles-based Concord Wilshire Partners helped satisfy outstanding liens filed against the development by local construction contractors and subcontractors.

Terry Drahota of general contractor Drahota Construction confirmed his firm had gone as far as filing a notice of intent to file a $1.54 million lien against The Highmark developers this year. The lien never was filed because the notice of intent triggered a payment from the bank in Georgia.

"The job was completed, and we've been paid in full," Drahota said. "It turned out real good, and we're really happy with that. We had a real positive outcome."

Steamboat Ventures' suit in Routt County appears on one level to be a dispute about contract language. It was originally filed in June. The defendants, who come from several states, retained Houston to represent them.

A series of motions and requests for extensions had unfolded until the trial date was finally set Oct. 5.

In their claim for relief, the plaintiffs are asking the court to affirm a breach of contract and ask for the 10 percent earnest money on the contracts, which represent an aggregate value of $8.98 million.

Philip Quatrochi, the attorney for the plaintiffs, claims the defendants breached their contracts by failing to live up to a requirement that as a perquisite to closing they provide information verifying their financial ability and credit worthiness. He also wrote that the defendants' failure to close is a "breach of each defendant's duty of good faith and fair dealing under the contract."

The defendants acknowledge they have not taken any steps to close on their contracts, nor did they seek the return of their earnest money. They further responded that they have not waived their rights under the contract.

Instead, they counter that they are not obligated to close because Steamboat Ventures has not lived up to a contract term that requires the developer to provide them with a notarized accounting of the value of any closings that have taken place, as well as any upgrades offered to those buyers.

Houston said the contracts his clients signed give them the right to be the last buyers to close on their units.

The plaintiffs counter that contract clause is "unenforceable" because it would unreasonably allow the plaintiffs to prolong the delays indefinitely.

Michelle Marsh, senior vice president of sales and marketing for Concord Wilshire Partners, expressed enthusiasm for Steamboat's real estate environment in remarks made to "Business Wire" at the end of December 2006. However, she did not respond to an e-mail query made in regard to this article.

Marsh told Business Wire that Intrawest's purchase of Steamboat would level the playing field with Vail and Aspen in terms of the competition for condominium market share. She added that Steamboat (Ski Area) generates continuous cash flow that fosters community development. She called that "music to the ears of developers and investors in the area."

Construction on The Chad-wick, as The Highmark was previously known, began in August 2003. It ceased in January 2004 after the original developer said rising construction costs had exceeded the business plan.

Work on the building did not resume until September 2005 after the city of Steamboat Springs approved value engineering efforts made to bring the project within financial constraints. The building was complete in June of this year.

Comments

seeuski 7 years ago

How can a clause agreed to by both parties be unenforceable? Wonder who wrote the clauses in those contracts? A little bit swiss cheesy, peeuu.

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foodchain 7 years ago

sounds like the plaintiffs will be needing one of those lawyers on the preferential treatment list.

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OnTheBusGus 7 years ago

The plaintiffs will probably get a lawyer who owes them a favour.

This building is cursed. It has had nothing but bad luck since groundbreaking, it seems.

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agentofchange 7 years ago

One is either in default or not. The idea of "forcing" default is weak. Without seeing the Contracts I cannot go further, however this does not reflect well on the Marketing of this project. If you were a potential buyer, would this situation make you feel warm and fuzzy? I think not.

As far as the comment about "clauses being unenforceable"... a court could rule the the demands of such a clause would not be workable. In this case the buyer has the right to "close last". Very strange stuff. For those of us who love contract goings-on, very interesting... for others involved in this project - not good. Looks like "good attorney fun", after all in deals like this, the attorney is the only one that wins.

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RoxyDad 7 years ago

The workers said it was going to be run as a hotel??

One heck of a hotel that would be... Very few and very large rooms. They would have to charge a huge amount to stay there a night !!

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steamskier 7 years ago

how can the developer default the buyers and take their deposits for not closing on their units if the project is being converted to a hotel? it seems like the developer would not want the buyers to close because he would be prevented from converting the project to a hotel. seems like the developer is just trying to find a way to fatten his pockets at the expense of others.

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agentofchange 7 years ago

It will be interesting to see the end result. Again, only the ones who bill by the hour for Legal matters win.

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housepoor 7 years ago

sounds like they have a buyer for the entire bldg lined up

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Scott Wedel 7 years ago

Like so many articles in this paper, the article promises one thing and delivers another. At the start it says the lawsuit is about buyers failing to purchase units, but later the seller's lawyer says it is about the sellers failing to provide credit and financial info proving they could purchase the units.

And the buyers say they have the right to delay purchasing the units until all others have been purchased.

I wouldn't be surprised if essentially goth sides are right in that the buyers may not be able to close on the units, but that is not news to the buyers because it was always their intent to sell the units when construction was complete. So now the sellers are trying to void the purchase contracts so the developers and not the preconstruction buyers can capture this additional profit. Meanwhile the buyers want it finished so that they can resell the units.

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twostroketerror 7 years ago

Weevils. Is it sell the unit, sue the buyer, take the $$, sell the unit again, or, buy unit pre const, wait for bloated real estate market continue to swell, sell finished unit for huge$$? Which one the lesser of 2 weevils? Sounds a bit like sellers remorse, but it's up to the lawyers. Ooo, 3 weevils.... http://en.wikipedia.org/wiki/Weevil

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WZ4EVER 7 years ago

Anyone out there remember the Gunn Brothers? They're baaack....at least in spirit.

That whole neighborhood seems to endlessly attract scams and con games. Whoo-hooo.

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flotilla 7 years ago

This is not the first time this development has used a loop-hole to get what they want. After the first pre-sale under Chadwick, the developers began re-selling units that had already been reserved without informing the original reservees. They made it through that just fine. Ask Market on the Mountain what they think of these Concord-Wilshire jokers. See:http://www.reviewjournal.com/lvrj_home/2006/Jun-06-Tue-2006/business/7793971.html

"Concord Wilshire Chief Executive Officer Steve Sirang did not return phone calls Monday. In a statement, the company said it has $7 billion in projects under development but is new to the hotel and casino business.

In 1988, Sirang, a former stock market trader, was convicted in federal court of seven counts of bank and wire fraud in connection with bad checks and illegal fund transfers during the 1987 stock market crash. A federal appeals court upheld the convictions in 1995.

On six of the counts, Sirang was sentenced to one year imprisonment for each conviction to be served concurrently, five years suspended sentence on one count, and five years probation with a condition that he pay $1.4 million in restitution. It is unclear whether he spent any time in prison." Nah, this guy isn't sketchy at all............

Now look carefully at what is about to happen at the Bob Adams Airport with the same affiliate developers manhandling a new developement:

AIRPORT MEADOWS FILING NO. 1 Mailing Address OWNERS ASSOCIATION 3001 SO LINCOLN AVE, STE E STEAMBOAT SPRINGS CO 80487-1790

Parcel Information Subdivision AIRPORT MEADOWS SUBD Tax Area 27X Account Number R8166184 Property Type Exempt Mill Levy 50.627 Legal Description LOTS 8, 9, 10, & 11 GREENBELT AIRPORT MEADOWS SUBDIVISION 1.69AC
Physical Address
80487
School District RE-2
Acres 1.69
Total Value 507000
Total Land Value 507000
Total Improvements Value 0
Total Assessed Value 147030
Total Land Assessed Value 147030
Total Improvements Assessed Value 0
Sale Date 6/7/2007
Sale Price

Another mess on the horizon c/o chadwick real estate group ooh excuse me, Airport Meadows real estate group.

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