Thompson Valley Towne Center

Thompson Valley Towne Center

INTRODUCTION

The Thompson Valley Towne Center case study exemplifies how complicated a development project can get, especially with the presentation of a highly involved property rights litigation. Many issues arise in this particular project involving multiple parties. All these issues must be closely analyzed and continually monitored by the partnership developing the mixed-use project. Holsapple and Marostica begin to contemplate the continuance on the project as they see many bumps in its road to completion. The initial idea sounded so great, and now the partnership is debating whether to scrap the entire project at a substantial loss.

LOOKING FOR THE LAND

It is my contention that finding and acquiring a property is the most important step in the development process. This decision will determine the involvement of a project as well as its success. The preliminary goal set forth by the partnership was to locate a property in Loveland, Colorado. They initially set out to complete three residential subdivision and any additional opportunities they found to develop for commercial use. So they went out and researched potential sites to develop. Form here, they would make a selection as to which properties they thought were best fit for development. One property they came across was at the north west corner of First and Taft. After viewing ownership and encumbrance information, they discovered that the property was being reviewed for a commercial center called Centennial Village. This land was obviously out of question for the partnership to develop, and could raise a possible competitive situation between the two completed projects. So the search continued on until the partners came across an 80-acre piece of property.

80 acres is a lot of land and could be home to more than just a shopping center. The access to this parcel could be made with much more ease, and it was just down the street from the previously mentioned parcel. A mixed-use development was definitely obtainable with 80 acres to wok with. Mixed-use projects are further complicated when dealing with the government as far as easements and zoning concern. Other considerations for this location involve a huge gulch and irrigation ditch lining the boundary on the southeast corner of the property. These are just a few issues that Holsapple and Marostica must have in mind when deciding to acquire such this large property. Although this project looks promising, the conveyance of the land would be extremely complex, as the partnership would soon discover through the O & E on this land.

CONVEYING THE TITLE

The report revealed that three siblings owned the property including George Hahn (Hahn), Pauline Wright (Wright), and Meryl Lang (Lang). Hahn had a bankruptcy case pending, but a trustee listed as the beneficiary. Hahn also had a long-standing battle with the IRS and he had served jail time for tax fraud and they too have a judgment against Hahn's assets. It would take the compliance of all the siblings' interest to in fact convey this property to the developers. So in 1997, the developers bought a right to purchase the property, subject to bankruptcy court approval. This purchase agreement is typical and it allows time for developers to handle some of the government issues that would in effect allow them to build the mixed-use project. Any of the co-owners could decide to not sell their right to purchase the property, which is a risky situation for Holsapple and Marostica to be in. Just think of the time and money involved with planning and having architects involved in a project that won't even get done because it is at the sellers discretion to revoke selling the property. The entitlement process was estimated to take 9 to 18 months, giving the sibling a tremendous amount of time to revoke their decision to sell. This would cost an estimated $200,000 from the pockets of the developers. So to move on from this point is a big decision from itself because of the risk associated with the land, and this risk could be avoided if the contract were dropped. At this point, I think it was a good idea for the developers to continue because the possible benefits of this project way out-weigh the risk assumed with its continuance--so far. These risks are not much more than an ordinary development projects and shouldn't stop the project from proceeding. In opting to continue, the developers would incur another $100,000 in funding for planning approvals.

ZONING AND EASEMENTS

Another issue the developers must deal with is accessibility. The land is in prime location, between the local high school and Agilent Technologies. The problem arises when the developers find it necessary to get an easement from Agilent (Hewlett Packard at the time) for both their view and access relocation. The 8 eight-acre gulch is on the property owned by the party to be negotiated with. The easement would require Agilent to relocate their entrance to Taft Ave. The view easement would be made to ensure that no building would be constructed top block visibility of the tenants in the shopping center. The partners would have to pay for these implications inherent with the development. These easements are considered critical to the project and would cost the developers an additional $600,000 in off site cost. The due diligence anticipated is far less than what this project actually calls for. These easements could have been forecasted if the developers planned properly, knowing exactly what will need to be done in order to put together a project of this size. Still, the money involved with the easements is insignficant to the amount of future cash flow that the completed project would generate.

The partnership decides to develop both commercial and residential sections within the grounds making this a mixed-use project. This property certainly has the capacity for the intended development as shown in the preliminary drawings. One issue that comes into play with the mixed-use project is a noise problem. The grocer and other retail stores would create a lot of traffic. With traffic there is noise and no residence is willingly going to accept a high level of noise from the neighboring grounds. The solution to the noise problem the developers thought up is actually pretty ingenious. By the introduction of a "transitional commercial zone" to further separate the residences from the anticipated noise of the commercial establishments, a self-storage facility would be constructed with masonry noise walls, blocking much of the noise that would come from the neighboring businesses. I know