Everyone did their best but…
[ by Mark Reaman ]
Despite thousands of dollars and scores of hours spent trying to convert the old Crested Butte Hostel into long-term affordable housing, the investor group made up primarily of second homeowners that put the building under contract this summer terminated the contract on Friday, October 22.
“Everyone involved is disappointed an agreement couldn’t have been worked out,” said local businesswoman Kyleena Falzone who, with about a half dozen North Valley second homeowners, made up the investment group. “We had local businesses lined up to fill the beds with their employees. While we had hoped that a management agreement could be worked out with the Gunnison Valley Regional Housing Authority (GVRHA), they weren’t able to commit to a long-term agreement and we weren’t able to find other investors to step up to secure the deal.”
With the intent of providing seasonal housing for local workers, Falzone and the investment group had stepped up to put the hostel building under contract last August. Located at 615 Teocalli Avenue, it had been listed for $6 million. Depending on the configuration, the expectation was that the hostel would provide between 33 and 41 beds with two two-bedroom apartments and 14 dormitory style rooms.
“We thought we could make it happen and while no one in the group expected to make any money on this deal and in fact thought we might lose a bit given the costs, no one wanted to lose a lot of money either. The investor group worked hard to prepare to close on the building this fall,” Falzone said. “We formed our partnership, prepared a long-term lease for GVRHA to run the property, and performed all the physical inspections.
“We have spent thousands of dollars and hundreds of hours on these activities with the assumption that we could structure a deal with the GVRHA that made sense to the investor group,” Falzone continued. “After many hours and many meetings, we came to a point where both sides could not agree to certain lease provisions. Both sides were determined to make it happen but in the end the gap was too big to bridge and consequently the investor group was forced to terminate the contract and will not be purchasing the youth hostel.”
Under Colorado’s TABOR (Taxpayer’s Bill of Rights) Amendment, government entities cannot sign contracts beyond a year. The investor group was hoping for a five-year commitment to move forward. While not the only hurdle, Falzone said that was a major hiccup and the one that was the deal killer.
GVRHA executive director Jennifer Kermode confirmed that state law prohibited the signing of a long-term lease on the building. Both she and GVRHA board chair Roland Mason said while they had hoped that such an out-of-the-box idea would have come to fruition to add another project in Crested Butte that helped relieve some of the workforce housing pressure, the restrictions on the Housing Authority as a public entity did not allow that.
“It is regrettable that we could not reach an agreement to convert the Hostel into an immediate workforce housing relief valve,” said Mason. “I greatly appreciate the initiative and passion the investors displayed trying to make this project work. I am hopeful that the effort put into this endeavor provides a road map for future private-public social investments.”
The public-private aspect was a draw for the real estate agent involved in the deal as well. “Everyone that took part in this was excited about the public-private partnership element,” said local real estate agent Diane Aronovic of Bluebird Realty who helped coordinate the deal. “There are a lot of people who don’t live here full-time but love Crested Butte and want to explore options on how to help the situation instead of having to pay a second homeowner tax for example. We all get so much more out of it when it’s by choice instead of a mandate.”
Crested Butte town manager Dara MacDonald said the town was not directly involved in the sale but was keeping an eye on it in hopes it could be another place to provide housing in town in time for this coming ski season. “The Town really appreciates the efforts of Kyleena, Diane Aronovic and the investment partners in coming forward with a positive and proactive effort to help with the housing problem,” she commented. “Unfortunately, the deal did not come together this time, but it is heartening to know so many members of the community are working on solutions. I remain hopeful that together we can find solutions to house the employees and working families that are so critical to our community.”
Falzone agreed and is not ready to give up on the task. “I’m passionate about housing because everyone has to have it,” she said. “Everyone did their best on this, but it didn’t work.”
She said if there is a silver lining to the situation it’s that new relationships have been formed and people want to address the housing issue. “The investors want to continue to try and help the workforce housing shortage and we are already looking at the next potential project,” Falzone concluded.