University Flats apartment complex faces foreclosure, bankruptcy sale

GREELEY — Foreclosure proceedings have begun against the owners of the south portion of the University Flats apartment complex in Greeley, even as the entire property faces a bankruptcy sale. 

A Notice of Election and Demand for Foreclosure was filed Thursday with the Weld County Public Trustee in Greeley against Greeley Flats DST, a holding company being used by Aliso Viejo, California-based Nelson Brothers Professional Real Estate LLC, which bought the 232-unit University Flats apartment complex, 1758 Sixth Ave., in 2018 for $21.3 million. The complex, which caters to University of Northern Colorado students, opened in 2014.

Nelson owned the property under two separate holding companies. According to the Weld County Assessor’s Office, Greeley Flats owned the south portion of the property, while Greeley Land LLC owned the north portion. Greeley Land filed for Chapter 11 bankruptcy protection last Dec. 13, and its liquidation plan was confirmed last week in U.S. Bankruptcy Court in Denver.

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As for Greeley Flats, a Notice of Election and Demand is the first document the Public Trustee’s office receives from a lender or its attorney in a foreclosure process. It’s recorded with the county clerk and recorder’s office, which officially starts the foreclosure process.

A foreclosure sale has been set for Feb. 7, according to the document submitted to the public trustee. However, the modified plan of liquidation for Greeley Land LLC appears to provide for the sale of both properties.

In September, the south portion of the University Flats apartment complex and its finances was ordered into receivership by Weld County District Court Judge Todd Taylor, who assigned Dallas-based Trigild IVL to manage it.

According to court documents, Greeley Flats borrowed $13.301 million from Arbor Commercial Funding 1 LLC in April 2018, and the rights to that loan were later transferred to Fannie Mae, the common name for the Federal National Mortgage Association, a government-sponsored enterprise.

Fannie Mae representatives learned last year that Greeley Flats had allowed three liens totalling more than $111,000 to encumber the University Flats property. Alleging that those liens violated the loan terms, Fannie Mae accelerated the entirety of the loan and demanded immediate payment. The receivership was ordered after Fannie Mae discovered this year that another lien of $1,040 had been placed on the property by the city of Greeley.

The complex received multiple citations from the city in 2021 related to sanitation and fire safety, as well as fines for some cleanup efforts.

Greeley Land also must sell its north portion of the property, under terms of the Chapter 11 bankruptcy approved Sept. 28 by U.S. Bankruptcy Judge Michael E. Romero.

Under the terms, a marketing period for the sale began Sept. 12, and potential purchasers had to submit initial offers by last Tuesday, Oct. 3.. The top bidders were to be selected by Greeley Land and its broker on Thursday, and bidders were to be notified that they have until next Tuesday, Oct. 10, to submit a best and final bid. A buyer and backup buyer are to be selected by next Thursday, Oct. 12. The target date for execution of the purchase and sale agreement is Oct. 23, and closing must occur no later than Dec. 31.

Weld County District Court Judge Shannon Lyons ordered Greeley Land LLC’s portion of the apartment complex put into receivership on Oct. 24, 2022, in the wake of lawsuits against the property owner that alleged loan defaults and mechanics liens. 

Nelson was sued by Pathfinder Crismon LLC, an affiliate of real estate investment and Tempe, Arizona-based financing firm RRS & Co., who alleged that it defaulted on two loans: an $8.6 million construction loan agreement from January 2020 and a $3 million loan from September 2021. Last Monday, two Pathfinder entities and the defendants filed a motion to dismiss the suit.

It also faced mechanics liens totaling $338,624.66 from companies including HVAC companies Poudre Valley Air Inc. and Pride Mechanical Inc.; flooring companies MRK Industrial Solutions LLC and Creative Design Flooring Inc.; and kitchen equipment supplier Specialty Appliance. 

Calls to attorneys for both sides were not returned in time for BizWest’s afternoon deadline.