Banking & Finance  December 3, 2010

Creative investment saves troubled subdivision

WINDSOR – Once troubled and at risk of bankruptcy, the 160-lot Belmont Ridge residential development in west Windsor is now showing signs of life and traffic. In November, brokers with The Group Inc. Real Estate began showing off a newly constructed model and three spec homes they’re advertising as move-in ready before the holidays.

The homes were built by Denver-based Pauls Corp. through its residential division. But the company’s involvement goes beyond home construction.

“This was previously a broken, stalled community,´ said Jodi Thurman, Pauls Corp.’s director in charge of Northern Colorado projects. “Believing that Belmont Ridge is a long-term, quality asset, the Pauls Corp.’s program is to inject new capital and vitality into the development with a new building program that meets the current market demands of product and price.”

Home prices at Belmont Ridge start at $255,000. The lots range from 8,000 to 25,000 square feet, and floor plans start at 1,700 square feet.

Belmont Ridge was initially approved by the town of Windsor in 2004 and was partially developed before the continuing recession brought the project to the brink of foreclosure. Permits had been issued for only 76 lots before the Pauls Corp.’s PREO Fund (Pauls Real Estate Opportunities) took over the project last spring.

The PREO Fund brings together investors and financial institutions to deal with troubled assets through co-investment, note purchases and asset purchases.

Deal unlike any other

Steve Fobes, senior vice president at Home State Bank, said the investment was unlike any deal he’s done in 40 years of banking.

“The uniqueness comes out of the fact that we have a lot of troubled real estate in all forms in Northern Colorado, on the Front Range and in the United States. There’s just a lot of stuff out there,” Fobes said. “With real estate going the way it has gone and the value of lots going down, the (original) borrower could not fulfill their obligation and ended up selling it to the Pauls Corp. We never took title; it never went through our hands. But we agreed to stay in the transaction with a certain amount of debt still out there. We’re a subordinate lender on the deal. We still have some debt.”

The Pauls Corp. invested $3 million in building the model and spec homes, which is called the Derby Collection at Belmont Ridge.

“They’re the catalyst,” Fobes said. “That’s something the banks don’t do, to get into the development business and put in bricks and mortar to jumpstart a project. They were willing to do that.”

Chris Manley, CFO of Pauls Corp., believes Belmont Ridge would have been developed eventually regardless of his firm’s involvement because of the underlying real estate’s proximity to Interstate 25 and employment and population centers.

“It would have been a success,” he said. “It was just a question of how long it would take. We didn’t change much. We’re building slightly different homes than were originally anticipated, trying to target what’s currently in demand. It’s a slightly lower price point.”

No one at Pauls Corp. wanted to speculate on a timeline for developing Belmont Ridge, but Fobes said three to five years may be realistic.

“If you think about how long it took banks and developers and builders to get into the problem, it’s going to take us that long plus to get out,” he said.

Affordable homes, large lots

Carole Newberry, broker at The Group Inc., has been on site selling Belmont Ridge to prospective buyers for a couple of weeks now and likes the response she’s getting.

“Pauls Corp. saw the value in the location and put a more affordable product in there and the response has been great,” she said. “The model is beautiful, really well done, and the neighbors come in and are impressed and happy to see some activity again in their neighborhood.”

The community is unique in offering affordable homes with large lots, she added.

“So many homes are so close together, with small lots and yards and no side yards,” Newberry said. “These homes have lots of space between you and your next-door neighbor.”

The neighborhood boasts wide tree-lined streets and a waterfall entry. Options include fireplaces, full basements and covered patios. The exteriors have stone or brick facades and the homes are energy efficient.

Newberry’s seeing interest from both first-time homebuyers and empty nesters and believes the new-home business in Northern Colorado is beginning to turn around. “Builders are building again,” she said. “There are options for new homes in various price ranges. Northern Colorado never really saw the low lows like they have in some other markets, but we’re definitely stronger now than in the last couple of years.”

Pauls Corp. has also purchased Harmony Ridge off of Harmony Road, as well as Longmont’s 121-home Clover Basin Homes development and 36-home Maxwell Place.

“We are very excited about our relationship with the Pauls Corp.,´ said Eric Thompson, president of The Group. “They have an excellent reputation for developing high-quality communities all over the country. They made a smart decision to acquire Belmont Ridge.”

WINDSOR – Once troubled and at risk of bankruptcy, the 160-lot Belmont Ridge residential development in west Windsor is now showing signs of life and traffic. In November, brokers with The Group Inc. Real Estate began showing off a newly constructed model and three spec homes they’re advertising as move-in ready before the holidays.

The homes were built by Denver-based Pauls Corp. through its residential division. But the company’s involvement goes beyond home construction.

“This was previously a broken, stalled community,´ said Jodi Thurman, Pauls Corp.’s director in charge of Northern Colorado projects. “Believing that Belmont Ridge is…

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