Acquires Key Office Building For 180 Project
City Still In Tussle With Hotel REIT
by Charles C. Bonniwell
The City of Glendale has won key legal victories over MAK Investment Group LLC the investment vehicle of the wealthy Kholghy family from Iran that owns Authentic Persian and Oriental Rugs on Colorado Boulevard and 6.5 acres along the Cherry Creek corridor. City attorney Jeffrey Springer of the law firm Springer & Steinberg, P.C. has been leading the city’s litigation efforts in this matter. The Kholghys have been attempting to prevent Glendale from creating a $150 million eating and entertainment district along Cherry Creek titled Glendale 180, formerly known as the Glendale Riverwalk.
The Litigious Kholghys
The Kholghys filed two Rule 106 actions in Arapahoe County District Court asserting that they and not prominent Houston developer Wulf & Co. should have been chosen as the developer for the project. Considering that the rug merchants have no prior experience in real estate development, some legal experts indicated they found the pleadings somewhat of an embarrassment. District Court Judge Charles M. Pratt, in his order dismissing the lawsuit, stated that the Kholghys’ actions were nothing more than a complaint that the city awarded the contract to another bidder and they did not have a property interest in the award.
Judge Platt then dismissed a second complaint filed by the litigious Kholghys that said the hearing by the city authorizes the potential use of eminent domain by its urban renewal authority was deficient. The court held that the city fulfilled all statutory obligations.
The only remaining litigation between the Kholghys and the city is raised in claims in another Amended Complaint in which the Kholghys asserted that the city did not follow a different statute C.R.S. Sec. 31-25-105.5 (2) dealing with the transfer of private property acquired by eminent domain. The court indicated that if the allegations in this Amended Complaint were all found to be valid it might be a legally sufficient complaint, but adding that it was “not making findings of conclusions of law, but allowing the further development of the record and legal argument.” Legal experts indicate that since the Kholghys’ land was not in fact acquired by eminent domain it would be difficult to see how they could prevail on their claims under the applicable statute, but that will await another day in court.
Kholghy Candidates
In the meantime rumors have surfaced that the Kholghys have been trying to recruit an existing Glendale City Council member to run against Mayor Mike Dunafon in this spring’s municipal election, but have been r
epeatedly turned down by everyone that has been asked.
“Why would anyone want to be considered the Kholghys’ pawn for mayor or any other position in the city,” asked former Glendale Councilman R. Wayne King. “The Kholghys have disgraced themselves bringing hate groups like the paramilitary Promise Keepers and the Virginia-based Institute for Justice to threaten and intimidate Hispanic and African American families and kids. The Kholghys, to the best of my knowledge, have never given a single cent to a single charity or needy family in Glendale in the almost 25 years they have done business in the city. To be their pawn would be viewed by most of the citizens of Glendale that I talk to as the lowest of low. Good luck trying to be elected in this town being a Kholghy candidate this spring. Most people I know would throw you out of their apartment or home if you came knocking. We are a very diverse town and no one wants bigots elected to city council.”
Key Acquisition
In more good news for the prospects of Glendale 180 becoming a reality, the City of Glendale acquired a key parcel of land along Virginia Avenue on October 12, 2015. The parcel located at 4490 East Virginia is the home of Gamma Construction, a Houston, Texas-based general contractor who built a two-story office building in 1998 on the site for its Denver metropolitan operations.
Gamma Construction
Gamma bought the one square acre site under the name William Square Properties Inc. in 1997 for $310,000 and constructed the two-story office building the following year. The parcel once housed the highly popular Colorado Mine Company restaurant which operated in Glendale’s go-go days of the 1970s and
1980s. The restaurant was rock legend Elvis Presley’s favorite bar and restaurant when he visited the Denver area, and was a regular hangout for Denver Broncos and other Denver professional sports players.
The city paid $2.6
million for the land and building and has agreed to allow Gamma Construction to occupy the site past closing as it builds another building in the Denver area for its operations. The city borrowed the money from Wells Fargo Bank but pledged $2.6 million in reserves thereby avoiding the expense of a Tabor election on the matter.
“It is a key acquisition for the city,” stated Glendale Mayor Mike Dunafon, “and places us one step closer to our dream of an entertainment district along Cherry Creek from Colorado Boulevard to South Cherry.”
The owner and president of Gamma Construction, Keith Williams, flew in from Houston for the closing at Land Title Guarantee Company. Gamma is a quarter of a billion dollar annual revenue company that acts as a general contractor across the West and Midwest.
Williams was highly complimentary about Glendale and its personnel. “Mayor Mike Dunafon and city officials were always true to their word. They are the type of people we as a company like to work with. We have been in Glendale for 22 years and hate to leave, but I, and my company, want to wish the city and its residents all the best. I hope that the city is able to make the Glendale 180 Project a reality after all the great work they have done to make it possible.”
REIT Files Suit —–
Election Canceled
In a related matter Glendale and Summit Hospitality LLC, the owner of Staybridge Suites Hotel located at 4220 East Virginia Avenue, are at loggerheads concerning the city’s acquisition of that 3.7 acre site. Summit is a multibillion dollar real estate investment trust that is traded on the New York Stock Exchange. The city presented the owners of the site, Summit Hospitality, an independent appraisal showing the value of the land and building to be $15.8 million and suggested that, if they wanted, Summit should get its own appraisal. Summit indicated in a recent filing with the Securities and Exchange Commission they had differed several million dollars in needed improvements as they expected the property would become part of the Glendale 180 project.
But in lieu of getting an appraisal Summit hired aggressive litigator Tim Flanagan who quickly filed suit against the city claiming its Downtown Development Authority (“DDA”) election was invalid. The litigation made front page headlines in The Denver Post on October 6 under the heading “Glendale, hotel square off.” The vote was 10 to 3 as there were only 16 eligible electors including Summit, its liquor license holder. Three ballots were sent to registered voters staying at the hotel although none voted.
The City of Glendale and its urban renewal authority voted along with five individuals who acquired very small parcels as part of setting up the metro district three years ago. Flanagan asserted that the individual voters were a violation of the TABOR portion of the state constitution, asserting those voters were a “subterfuge of property ownership.”
However, The Denver Post quoted Ann Terry, executive director of the Special District Association, who noted that creating small landowners is a common mechanism in Colorado for metro districts to meet the ownership requirements of the state law.
Glendale has filed a motion to dismiss the suit indicating that it is frivolous and moreover Flanagan failed to file his suit in the proper timeframe under state law and asked the court to award the city attorney fees and costs.
Deputy City Manager Chuck Line stated that Summit owned 66% of the voting rights while only 23% of the land. With the acquisition of the Gamma Construction building the city now owns 77% of the land in the DDA. He also indicated Glendale created the formation of its metro exactly the same as Denver did in setting up a metro district regarding Union Station.
Nonetheless The Denver Post, a few days after its article, wrote an editorial castigating Glendale for having the five individuals participate in the DDA election.
The city canceled the Tabor election scheduled for November 3, which would have allowed the DDA to issue $200 million in bonds to help finance the Glendale 180 Project. The city’s project manager for the redevelopment, Mike Gross, hoped delaying the election would make negotiations with Summit easier and would allow Glendale to clean up outstanding litigation before moving forward.
Mayor Responds
Glendale Mayor Mike Dunafon indicated that the Summit REIT simply wanted to “put a gun to the head of the taxpayers,” and the lawsuit was little more than trying to get the city to overpay for the property. Summit had apparently previously indicated to the city that it was not spending several million in improvements in anticipation of the city acquiring the site.
Dunafon went on to note, “A major project is a great deal easier if you are simply buying a large vacant former farmland, but Glendale has no farm or vacant land as it is right in the middle of the Denver metropolitan area. When people find out that a city is doing a project they like to double or triple the property price, but a city has an obligation to pay a fair price but not rape the taxpayers. Urban projects always have a lot of challenges, but if you can get them done they are often enormous successes because of the demographics.”
Summit has repeatedly refused to return telephone calls from the press including The Denver Post, Westword and the Glendale Cherry Creek Chronicle.
Favorable Westword Article
Contrary to The Denver Post’s harsh editorial and more in line with John Aguilar’s front page story in The Denver Post, Westword’s Melanie Asmar wrote a seemingly balanced and generally favorable article on Glendale in its October 20 edition titled “Glendale Has Big Plans for the Future — And Just One Small Obstacle.” The article concluded by quoting Mayor Dunafon regarding the lawsuit by Summit and by implication of the lawsuits by the Kholghys — “It’s a shakedown.”
New Kholghy Demands
In the meantime, the litigious Kholghy family wrote another letter to the city September 15, 2015, demanding that the blight designation from their property be removed claiming it caused real estate developers not to be interested in their property.
Deputy City Manager Chuck Line replied back on September 15 noting the factors that caused the Kholghys’ property to be deemed blighted in 2004 and 2013 had not been remedied. He also expressed incredulity about the Kholghys’ claim that property in Glendale must be removed from the blighted designation before it could be redeveloped, noting numerous major properties designated blighted in Glendale that had been redeveloped, including but not limited to: CitySet, Cherry Creek Corporate Center, the Solara Apartment complex, King Soopers and Super Target.
He emphasized a landowner redevelops its property which causes the blighted designation to be removed, not the other way around. No reply to date has been received by the city from the Kholghys.