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that the developers have seen Steamboat's real estate market rise substantially and don't want to close the sales at out-of-date prices.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