It’s the kind of opportunity normally reserved for real estate developers with experience – 2.8 acres earmarked for commercial, residential and retail development in Stapleton, one of the hottest-selling neighborhoods in metro Denver.
Instead, the potential multimillion- dollar deal is – at least for now – exclusively reserved for Jacqueline Peterson, a newcomer to property development with relatively little success.
In fact, she recently defaulted on $4.7 million of a city-backed loan used to build affordable housing.
Peterson’s modest experience raises questions about how she won multimillion-dollar loans from Denver and a special arrangement to develop land in Stapleton.
Even city officials who have worked closely with Peterson admit that Denver and Stapleton’s master developer, Forest City Enterprises, wanted so badly to see a local minority-owned firm succeed that they allowed its owner to get in over her head.
“No one involved in this web of relationships walks away looking great,” said Jacky Morales Ferrand, director of Denver’s department of Housing and Neighborhood Development Services, and a former employee of Cleveland-based Forest City.
“Is it fair to say that all of this is Jackie’s doing? No. She was allowed to get into this position by Forest City and the city. She wasn’t powerful enough to create this mess by herself.”
Costly mistakes
Peterson has handled only four construction projects since beginning her development career in the mid-1990s. One is considered quite an achievement. The three others have struggled to varying degrees, leading Peterson and her young company, TP Development, to big financial losses.
Peterson says she lost more than $1 million of her own money on Roslyn Court, the affordable-housing complex in Stapleton she built and walked away from early this year.
Peterson acknowledges that market forces aren’t completely to blame for the project’s financial troubles. She admits making several costly mistakes that stemmed from having to “learn everything on my own.” She also admits to having conflicts with business partners – including Forest City.
Critics and supporters paint a far more complicated picture. Peterson is, they say, both victim and perpetrator.
City officials and Forest City executives launched her development career with publicly guaranteed loans and land options – moves that allowed them to tout their efforts to nurture a company owned by an African-American woman. In return, Peterson sometimes has repaid them with financial blunders and blistering criticism.
“I’m rooting for Jackie because I know she can do great things,” said Myrna Hipp, Denver’s deputy director of economic development. “But I also know a lot of people out there are pulling against her.”
Peterson is tentatively planning a four-story building in Stapleton that would hold offices, shops and swanky condominiums. She calls the project Peterson Park Place and expects to pitch it to Forest City executives in September.
This time, however, Peterson is likely to find herself pulling together a deal without much help. Because of her recent default, the city is unlikely to lend her more money, Hipp said. Forest City has given her a deadline it wouldn’t disclose to begin construction or forfeit the project. And given that Peterson has burned some bridges in private business circles, she could also find it tough to line up investors and professionals – such as architectural and engineering firms – willing to give her a break on their fees.
Burger King is a hit
Peterson hasn’t always been in a position to wheel and deal in such big sums. After graduating with a degree in political science from the University of Colorado at Denver, the self- described military brat took a job in customer service at a local bank.
She eventually joined the staff of the Downtown Denver Partnership, an organization that promotes business in the city’s core, and she helped promote the Colorado Black Chamber of Commerce.
Peterson ultimately was drawn to senior citizens and their need for affordable housing. While studying ways to provide it, she found her way to Denver’s Department of Housing and Neighborhood Development and to Hipp, then serving as its director.
For almost two years, they worked on plans to build an affordable rental complex for seniors in one of Denver’s most economically depressed areas. It eventually was built at East 32nd Avenue and Downing Street, with ground-floor offices, apartments and a neighboring Burger King.
Though she had never developed a property, Peterson received loans worth $2.2 million in 1997 and 1998 through Denver’s office of economic development with Hipp’s recommendation. She also persuaded U.S. Bank to lend her roughly $1 million for the project she named Clyburn Village/Denver, using a family name.
“It’s not unusual for us to support entrepreneurs who have no experience,” Hipp said. “We could also see that she had assembled a good team to help her.”
The project appeared to be successful. The Burger King quickly became one of Colorado’s busiest, generating more ice-cream sales than any other state franchise. It also created 18 jobs, nearly all of which went to people living within a 2-mile radius of the restaurant.
Peterson sold the Burger King property and repaid the $443,431 city loan she used to build it. Her success bringing Burger King to a blighted neighborhood won her a mention in Fortune magazine.
While the Burger King hummed along, the nearby senior rental complex did not, in large part because of a sluggish rental market. Peterson fell behind on loan payments, and her relationship with U.S. Bank grew increasingly tense.
The two parted ways in late 2003. U.S. Bank was left with the apartments and roughly $500,000 in city loans used to construct them. It hired another company to manage and maintain the apartments, which were promptly renamed Downing Square.
Peterson assumed control of the complex’s seven ground-floor offices and the $1.5 million city loan attached to them. Although six of the seven are occupied – Peterson houses her company, TP Development, in one – she fell two months behind this year on city loan payments. She caught up on payments in early July but still owes more than $1.2 million.
Minority developer
Troubles with Clyburn Village/Denver hadn’t come to light when Forest City executives signed on in 2000 to redevelop Denver’s former Stapleton Airport.
The publicly traded company faced stiff competition before being named master developer of the 4,700-acre site. Denver officials required the winning developer to build affordable housing and to provide development and construction opportunities for companies owned by minorities and women. When civic leaders asked Forest City how it would live up to those expectations, the company announced a new “associate developer program.”
It wasn’t easy to find even one local, minority-owned development firm eligible to take on the work, said Landri Taylor, Forest City’s vice president of community affairs. Taylor, an African-American who devised Forest City’s associate developer program, said he spoke to hundreds of people at dozens of community groups before he found Peterson.
Peterson became the company’s first associate developer. She then proposed two projects: a senior rental complex, which she named Clyburn at Stapleton, resurrecting her family name, and her first for-sale project, an 80-unit complex for low-income buyers she called Roslyn Court.
Appealing to the same Denver officials who had helped with Clyburn Village/Denver, Peterson in 2002 and 2003 won city-backed loans worth almost $7 million to support her work in Stapleton.
“It looked like she had been so successful; we didn’t know there were problems,” Hipp said. “So there was no reason to think she wouldn’t be successful at something else.”
Peterson admits she miscalculated the cost of building Roslyn Court, starting with the expense of prepping the land for development. She placed the buildings on the lot in such a way that it cost her more than expected to build alleys. And because affordable housing has price caps, cost overruns were her responsibility. Peterson accepts some of the blame for the project’s sluggish sales, saying her initial marketing missed the mark. She thought single mothers and “people of color” would be the primary target for her one-, two- and three- bedroom units. Instead, many buyers were young, white male professionals working in entry-level jobs.
As a result of these missteps, Peterson had sold only 49 of Roslyn Court’s 80 units by May and was struggling to meet loan payments.
The Clyburn at Stapleton senior apartment building, constructed next door, is 100 percent leased and has a waiting list, Peterson said. However, Denver’s tough rental market forced her to lower age restrictions to keep it that way. Denver officials confirmed Friday that Peterson has defaulted on $100,000 of another city- backed loan used to construct the complex. Morales Ferrand, Denver’s affordable- housing director, said the city has “secured a verbal agreement about the loan’s repayment” from Peterson – but has filed a lien against the property until the money comes through.
Taxpayers absorb risk
Peterson and Forest City executives disagree about the extent to which she asked for – and they offered – help when problems cropped up.
“What does that (associate developer) program mean?” Peterson asked. “It means to me that you’re supposed to help foster and assist. I didn’t have any mentors. I had to learn it all through on-the-job training.”
Tom Gleason, Forest City’s vice president of public relations, stressed that the company doesn’t “guarantee anyone success – just an opportunity to succeed or fail. That’s the reality of the world and the reality of the real estate business.”
Peterson also noted that the two minority-owned firms tapped to participate in Stapleton’s associate developer program were assigned to build affordable housing. Gleason said there are 19 homebuilders in Stapleton and that Peterson asked to build the affordable complexes. “It wasn’t something she was forced to do.”
The other firm run by African-American owners borrowed roughly $1.3 million from the city to build an affordable housing complex called Syracuse Village, city officials revealed late last week. Forest City extended “a great deal of technical help” to the firm but wound up repaying more than $1 million, Ferrand said.
Forest City is now working with the white founder and principal of New Town Builders, Gene Myers, who has extensive experience in affordable-home construction, with hopes he will build affordable housing in the neighborhood.
Forest City executives say they extended an array of support to Peterson, including discounts on land costs, regularly scheduled sales-team meetings and help with architectural design.
“There was only so much we could do,” Gleason said.
Taylor agrees. “We might mentor,” he said, “but we don’t make business decisions because otherwise our associate developer program would be a shell and have no credibility at all.”
Hipp concedes the city may have handed the neophyte developer too much money too soon. “We try to do a good job and what’s right, and sometimes it doesn’t work,” she said.
But Denver’s good intentions didn’t necessarily protect taxpayers from mistakes caused by Peterson’s inexperience. The loan agreement tied to Roslyn Court, for example, had a number of flaws, said Denver Economic Development Director John Huggins.
It did not provide for a personal guarantee from Peterson. Instead, it designated the city as the only financer – and therefore only risk-taker – of the project. If Peterson couldn’t make good on the loan, Denver taxpayers would have to.
Peterson also built all 80 Roslyn Court homes at once – incurring the entire cost of construction – which only made matters worse, Huggins said. Conventional construction loans are typically structured so developers can’t continue building without demonstrating reasonable sales levels.
Huggins faults city officials – including City Council members who were required to approve it – not Peterson, for the loan’s imprudent structure.
“We wouldn’t take on these risks again,” he said of the loan, which was not approved under his watch. He has established a review committee that more carefully scrutinizes the terms under which loans are structured and applicants’ ability to repay them.
Forest City created a limited liability company, Stapleton Housing Initiatives, to take over Roslyn Court and agreed to make loan payments, manage sales and infuse $1 million into the affordable-housing project. The group also has worked to identify more minority-owned firms to join its associate developer program. Taylor, the executive who recruited Peterson, said he has high hopes that one black- owned company will construct a carwash in Stapleton’s commercial district.
Peterson is ready to lay claim to the land option she secured when Forest City was wooing her years ago. She is looking for investors willing to finance her biggest project yet.
Staff writer Christine Tatum can be reached at 303-820-1015 or ctatum@denverpost.com.
