Durango School District officials discussed purchasing a five-unit workforce housing development Tuesday, but concerns about developer debt delayed the decision.
The build, called the Buena Vida Townhomes, at 229 Buena Vida Ave., includes two- and three-bedroom units priced at $2.65 million for the district.
The development, headed up by the Landy Swaab development company, was selected from three options under consideration by the district.
A vote on moving forward with the sale was planned to take place at the work session, but board members’ concerns with the purchase, including previously undisclosed liens put in place by workers on the build, led them to postpone the decision until the board’s regular meeting at 5:30 p.m. April 28.
A lien is a legal claim filed by someone owed money. It ensures the person can take legal action if a debt is not paid. Three people working on the build say the developer owes them money, and one is refusing to work until cash is in hand, said Chris Coleman, district chief operations officer. The other two have completed their work but have not been paid, he said.
Coleman said the developer did not disclose the liens and the district discovered them by happenstance.
“We would not have known about them, which is relatively typical in a real estate deal,” he said. “They’re not obligated to disclose that at that point. It would have come out during due diligence, very likely after we had made an offer. ... I’m not saying we should forget about that, and we do know it, so we need to take that into consideration.”
Part of the negotiations for the sale include the developer paying $12,500 per week – or roughly $50,000 per month – if the units fail to be developed or completed in the contracted period, Coleman said.
The district could walk away if deadlines are not met, Coleman said, and the developer would legally have to give the district its money back; but questions of transparency and trust could surface in that situation, and it would not be as secure of an option as escrow.
“It’s not full transparency,” Coleman said. “It’s not as good as a business in escrow where you just get it back in your account the next day. But there are very clear legal ramifications.”
After voicing concerns about the liens, the board voted to table the decision to allow time to gather references and look into the developers’ history, consult the district’s legal counsel on stronger protections and alternative terms, and explore whether a different payment schedule or a lower sign-on purchase price could be negotiated.
“I received more information than I had before on this particular item, and I have some concerns. They’re about the liens and the trouble that this group might be in,” said Board President Kristin Smith. “I’d like to get more information, maybe possibly talk more about it. ... It sounds like these folks are in their own pickle, and I don’t think there’s a lot of people standing there ready to swoop in, so I don’t see the urgency, other than for our staff.”
Coleman, along with the district’s housing consultant, Kwame Spearman, provided several reasons for recommending the Three Springs development versus others.
The development is situated in an ideal location near the new Three Springs Elementary School build and offers the fewest units of the three options, which could allow the district to test demand with lower vacancy risks, Coleman said. The units will also be ready for move-in by the summer, which would roughly line up with the move-in timeline at the Lightner Creek Apartments – the other workforce housing site purchased by the district. The build offers two- and three-bedroom units, which are not available at Lightner Creek.
Lightner Creek, which touts 35 units, all one-bedroom or studio, is nearly full, Coleman said, minus a few units intentionally reserved for recruitment of new staff.
The combination of fewer operating expenses and higher rent at the Three Springs development would mean higher net income than at Lightner Creek, Coleman said, creating a lower occupancy rate to break even – around 40% occupancy, Coleman said. At 100% capacity, the district would be bringing in $113,659 annually, he said.
Monthly rates for the Three Springs development would be between $1,610 and $2,508 – around $13,000 less per year than average market price for similar units in Durango.
epond@durangoherald.com
