The developer of Roslyn Court, an affordable-housing complex in Denver’s Stapleton neighborhood, has defaulted on $4.7 million in city loans. But the city has brokered a deal to bail out the company, records show.
Cleveland-based Forest City, Stapleton’s master developer, has created a limited liability company, Stapleton Housing Initiatives, to take over the complex from developer Jacqueline Peterson.
“We’re extremely grateful to Jacqueline Peterson and Forest City for cooperating and hopefully protecting the city from losing money,” Denver economic development chief John Huggins said.
The default and subsequent deal is just the latest issue Mayor John Hickenlooper’s administration has had with the city’s loan program.
Payments on more than $4.3 million in city housing and economic development loans to private businesses are more than six months late. Many of the 21 delinquent businesses or individuals have shut down or declared bankruptcy, making the city’s job of recouping the full amount of the loans nearly impossible.
All of the loans were made before Hickenlooper took office two years ago.
Denver lent a company controlled by Peterson $6.5 million in 2002 and 2003 to build affordable housing on East 26th and 28th avenues off Roslyn Street.
The city’s loan was to be repaid by proceeds from the sale of the complex’s one-, two- and three-bedroom units, but sales have remained sluggish. Eighty condominiums and carriage homes were finished in 2003. Thirty-one are still for sale.
The new company formed by Forest City will infuse $1 million into the affordable-housing project, manage sales and make the loan payments.
Forest City officials declined to comment. The publicly traded company has stepped in because part of its development agreement with Denver states that it must construct a certain number of affordable homes, Huggins said. Selling Roslyn Court units at full market prices might generate money for the loan’s repayment more quickly, but that also would mean Forest City would have to replace the Roslyn units with other affordable housing.
The original Roslyn loan agreement had a number of flaws, such as not providing for a personal guarantee from Peterson and designating the city the only financer – and therefore the only risk-taker – of the project. Because of the latter, the city essentially acted as a construction lender, an expertise it lacks.
“We would not take on these kinds of risks again without a personal guarantee or without another lender involved who specializes in construction lending,” Huggins said.
Peterson declined to comment. However, last year she said that slow sales were partly due to an ineffective marketing strategy and her inability for several months to market the units to lenders approved by the Federal Housing Administration. Peterson said she expected buyers of the units to be single mothers and “people of color” – but it turned out most of those people wanted a detached house or their own small yard.
The agreement requires Denver City Council approval and will be addressed at the council meeting today.
Staff writer Karen Crummy can be reached at 303-820-1594 or kcrummy@denverpost.com.
Staff writer Christine Tatum can be reached at 303-820-1015 or ctatum@denverpost.com.