Project's finances caused concerns

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Buffalo Ridge Apartments
Bret Hartman/Vail Daily

Tamara Miller
October 6, 2004

AVON - It all seemed a little too familiar.

An affordable housing project unable to pay its construction loans. Requests for financial help. A soft rental market keeping apartments vacant far longer than expected.

Commissioner Michael Gallagher saw a similar scenario at the Mountain Glen project in Gypsum. While serving on the housing board that oversaw Mountain Glen, Gallagher watched the complex go bankrupt. And in his mind, Buffalo Ridge - the affordable housing project above I-70 in Avon - seemed on track to do the same.

Commissioner Tom Stone agreed.

After seeking input from County Administrator Jack Ingstad - and only receiving assurance that the project would be OK for a year - the two commissioners believed the Lake Creek Affordable Housing Board, which oversees a complex in Edwards, should deny Buffalo Ridge's request for $200,000.

"I don't believe in throwing good money after bad," Stone said.



Why was the money needed?

Nevertheless, the Lake Creek board approved Buffalo Ridge's request. Even more concerning to the two commissioners was that two of their appointees - Commissioner Arn Menconi and local businessman Rob LeVine - approved the request, the commissioners said.

Shortly after, Menconi and LeVine were removed from the Lake Creek board.

Buffalo Ridge's developers also asked Avon for more funds. That request never made it before the Avon Town Council because its members believed they had already done enough to help, said Town Manager Larry Brooks.

The fact that Avon wouldn't give more money to Buffalo Ridge was also a bad sign, Stone said.

And after learning Buffalo Ridge had already received almost $1 million in outside help, he was more convinced the development was in financial trouble, Stone said.

"I didn't know until after the fact that (Eaglebend housing board) had already given $600,000 worth of seed money," Stone said. "Michael and I both agreed that this was so similar to the money that was wasted on the Mountain Glen apartments. This was another Mountain Glen in the making."


But the details paint a different picture. The Eaglebend Affordable Housing Board gave $600,000 to Buffalo Ridge and Avon did handed over $495,000 out of a community block grant.

But those grants were not for overruns, they were part of the initial plan to pay for the projects, said Jamie Fitzpatrick, Lake Creek board member and vice president of Buffalo Ridge's development company, Corum Real Estate.

"There was a total cost of the project and the sources to pay for those costs were a combination of HUD loans, the block grant and the grant from Eaglebend," Fitzpatrick said.



Charity or subsidy?

LeVine and Menconi, who both have backgrounds in real estate management, believed the grant was a good one, and would simply be the last piece needed to get Buffalo Ridge on its feet.

Both sides concede Buffalo Ridge had a difficult time leasing out apartments in the beginning. The complex eventually began offering deals, such as reduced rent, for the first few months.

Buffalo Ridge is nearly 100-percent leased now, Menconi said. And he disputes comments made by his colleagues that there is a glut of affordable housing in the valley, he said.

"In fact, there is just a small amount of extra capacity now," Menconi and LeVine wrote in a recent column explaining their actions. "While demand for housing can quickly outstrip supply in a single season, providing adequate inventory takes several years of planning."

A copy of the wire transfer request shows the $200,000 was sent directly to the title company for Buffalo Ridge. While Menconi strongly disputes claims the grant was a direct subsidy for a private developer, Stone stands firm.

The construction over-runs are the fault of Corum, the developer, Stone said.

And since $130,000 of the $200,000 grant will go to pay off construction loans, that money is essentially helping a private developer meet its financial obligations, Stone said.

"That's not quite true," Fitzpatrick countered. "Remember, the developer has no ownership interest in the deal and had no obligation to cover those shortfalls."


And construction overages were only part of the problem, Fitzpatrick said. The softer rental market was the real unforeseen challenge because Buffalo Ridge failed to bring in enough revenue in rents to pay for the balance of the construction loan.



Rent rules

But Stone said the $200,000 grant was inappropriate because Fitzpatrick sits on both Lake Creek's and Buffalo Ridge's boards. Both projects are managed by Corum Real Estate and, Stone said, Fitzpatrick's involvement could be a conflict of interest.

Lake Creek's $90,000 grant to the Riverview complex in Eagle-Vail differs significantly from this scenario, Stone said.

"First of all, there was no person who sits on both boards," he said. "I only sit on the Riverview board, and we didn't have Corum as a management company."

Conflict of interest, aside, it is common to have money transfers between boards with similar members.

For example, Jeff Spanel serves on the housing boards for Eaglebend, Buffalo Ridge in Avon, and Kayak Crossing in Eagle-Vail. Eaglebend has given money to Buffalo Ridge, and has made a loan to Kayak Crossing.

Because Buffalo Ridge is being built using federal Housing and Urban Development loans, rents must be affordable to people making no more than 80 percent of the average local wage.

If the complex had not received the grant, it may have had to raise rents to make ends meet, Fitzpatrick said. Not only would Buffalo Ridge lose the federal loans by violating the rent requirement, but the complex would no longer be affordable, he said.

"(The grant) was made to help affordable housing," Menconi said.

Staff Writer Tamara Miller can be reached at 949-0555, ext. 607, or tmiller@vaildaily.com.