Banks work to resurrect St. Michael’s

GREELEY – St. Michael’s Town Square will return to fight another day – at least if a Denver real estate company has anything to do with it.

With all of the commercial buildings either bank-owned or headed that way and vacancies mounting, the situation looks dire for the west Greeley development. However, two banks that own a majority of the property have hired SV Commercial Partners to not only sell the property, but also manage and lease it – essentially to resurrect it.

The 240-acre development, named after the patron saint of chivalry, was the brainchild of oil magnate David Calvin. A residential portion was started in 2002; retail followed the rooftops around 2005. The final buildings were finished in 2008, about the same time the retailers started to struggle.

DJ Calvin, director of real estate for Calvin Enterprises and son of David Calvin, didn’t return a call for comment for this story, but in an August 2009 interview, he said that at its peak St. Michael’s was about 95 percent occupied.

In early 2008 retailer Tara’s Ark Floral and Design Studio stopped paying on the lease, and shortly after that, Tranquility Spa and Salon closed. Calvin said the decline was fairly steady from there on out, with about one tenant per month going out of business or closing.

Starting last July, properties started going back to the banks, when Scottsdale, Ariz.-based Goldwater Bank took all four buildings on the west side of the development, except for one tenant-owned space.

In November Denver-based Mile High Banks took possession of the former Cranberries Market, Harvest Restaurant and the mixed-use building that housed Calvin Enterprises. It also now owns the Depot Events Center, which is currently scheduling and hosting weddings, concerts in the amphitheater, and other events.

Greeley-based Bank of Choice initiated foreclosure proceedings on the final building in the development – the last one still owned by the developer – in February with a $3.1 million note in default. At the same time, the bank also started foreclosure proceedings on a number of residential lots owned by David Calvin’s Meyer Farm Development Inc. Meyer Farm still owes $8 million on an $18.7 million note.

Goldwater and Mile High Banks came together to solve their common problem of what to do about St. Michael’s. They hired Denver’s SV Commercial to be the problem solvers.

Expertise to deal with crisis

The general economic crash in 2008 left everyone in the real estate market scrambling for business, according to Jennifer Muller, senior property manager for SV Commercial Partners, the commercial real estate-focused firm spun off from SV Capital in July 2007. SV Capital’s investments are concentrated in luxury resort properties.

“Back in 2008, everyone went into survival mode,” Muller explained.

For SV Commercial, that meant adding property management to its brokering services. According to Muller, SV Commercial Founder Brian Cuje was able to leverage his connections to insert the firm into the relatively new and growing business of managing bank-owned and other distressed properties.

To date, Cuje has worked as receiver, asset manager, property manager or loan purchaser for very large institutions including Bank of America, Chase Bank, JP Morgan, Coast Savings and Loan, GE Credit, Wells Fargo and the FDIC.

The St. Michael’s deal brings the firm into new client territory. Smaller local and regional banks have not been as apt to bring in third parties to perform across-the-board services on their foreclosed properties. Muller explained that more and more banks are considering it as an option for increasing value and unloading unwanted real estate.

“We wanted to get our feet wet with St. Michael’s,” Muller said. “We have some real stigma to overcome. If we can save St. Michael’s Town Square, we feel we could save just about anything.”

SV Commercial is also dipping its toes into the Northern Colorado territory. Muller predicts that the firm will take on more projects and possibly invest in its own properties in the region during the next 12 to 18 months.

To that end, the company hired local broker Todd Lund as northern region director.

Lund has experience in all the sweet spots for SV Commercial. He has been a broker at Re/Max Commercial Alliance, The Group Inc. and Wheeler Commercial. After graduating from Colorado State University in 1985, he worked as a commercial property manager and acted as receiver for several notable distressed properties including Old Town Square in Fort Collins.

Lund started working with SV Commercial in October and was at first heavily focused on renegotiation of leases in St. Michael’s. He found that rates of up to $30 per square foot were way over market, at least in the current economy.

“When things were clicking along, that was probably feasible,” Lund said. Lease rates offered there now are roughly half what they were one to two years ago.

Restaurants bright spots

Negotiations were under way with the development’s restaurants – Harvest and the Hobnobber Tavern – jointly owned by restaurateur Mike Hood and David Calvin. Lund said that the establishments were the shining stars, drawing good traffic to the emptying center, so he was surprised when they suddenly closed on Nov. 6.

“It was pretty abrupt and a little surprising,” Lund said, adding that they had been close to a deal that would have cut the eateries’ rents in half. “Once the restaurants closed, at that time of year, it really killed the momentum at St. Michael’s.”

If it wasn’t bad enough to lose two tenants in one fell swoop, the banks also had to deal with cleaning out the sites, which were stocked with food, and paying some delinquent taxes.

On the bright side, by paying the back personal property taxes Mile High Banks was able to retain every piece of equipment in the former Harvest – down to the silverware and plates. Lund counts that as a huge plug-and-play opportunity for someone with a good restaurant concept.

He is seeing other bright spots as well. Several tenants have just signed new or renegotiated leases. The former Hobnobber will reopen in June as The Tavern at St. Michael’s. The restaurants, in Lund’s mind, are key to the revitalization of the center.

“The issue with St. Michael’s is that some people don’t know it’s here,” he said, admitting that he didn’t know about it until he attended a Re/Max meeting there in 2008.

Lund feels that if development had occurred first at the corner of 65th Avenue and Colorado Highway 34, just north of St. Michael’s, traffic flow might have been better. There are signs of life there now, with Discount Tire in the midst of constructing its second Greeley location. Lund is also working with the city to get to a directional sign pointing off the busy road.

To be more competitive, the banks have agreed to condominiumize the buildings to committed sellers. Lund also thinks that the mix of tenants will shift from the original vision to include fewer retailers and more office and medical. While not necessarily picky about the type, Lund is looking for good-quality tenants.

“We don’t want to put tenants in there that would fail again,” he said, explaining that his main objective is to make the center vibrant so the banks can sell them and recover most, if not all of their money. “It has to be a win-win situation, and we’re trying to make it that.”

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