Loveland's Independent News Source
Loveland - December 2, 2012

Loveland city officials are quietly working a real estate deal with Loveland's multi-faith charity, House of
Neighborly Services (HNS), to purchase the group's building in downtown Loveland by the end of this year.

The city's primary motive in buying the property will be to assist the popular charity in acquiring a new
and larger facility in Loveland.  Not coincidently, the down payment owed on the parcel HNS is under
contract to purchase at $3.2 million is $550,000; the same price Loveland City Manager Bill Cahill is
privately lobbying the City Council to approve as the purchase price for the HNS property located at 565 N.
Cleveland in downtown Loveland.

HNS announced it had entered a conditional contract to purchase some industrial buildings in the Ward
industrial park on 11th Street in Loveland last September which is the former SuperVac facility. (
see RH

The purchase contract for the 11th Street property is conditioned on HNS depositing $550,000 and closing
the deal by December 20, 2012.  The property sellers, Saddlenotch LLC (owned by Gunter and Gloria
Preuss of Loveland), bought the property from SuperVac last year and appear positioned to realize a
significant capital gain from the sale of their recently acquired industrial property by selling to HNS.   See
more about the Preuss family in column at right and their award winning
10,000 square foot home near

The Preuss's are using a 1031 exchange for the transaction - a process that allows the seller to defer taxes
on any capital gains by rolling that profit into a like investment property purchase within a limited period
of time.  LovelandPolitics learned that HNS, at Cahill's request, asked Gunter and Gloria Preuss for an
extension in the contract but were refused.  Therefore, HNS is pressuring the city to purchase HNS's
current property by year's end so the Preuss's can get their capital gains tax deferral within the current
tax year.   Loveland's City Council has yet to discuss the issue in public and would likely need to approve
the property acquisition under an emergency appropriation during their December 18, council meeting.

While the HNS purchase contract is for $3,200,000, the Saddlenotch (Preuss) is kicking back to the charity  
$250,000 in a tax deductible donation, making the effective price to HNS $2,950,000.  Nonetheless, some
on council have raised questions regarding the high price HNS is paying for the Preuss's property.

Documentation of city's intent to purchase

The only publicly available documentation of the city's intent to buy HNS's current building came in the
form of an email sent by Loveland City Manager Bill Cahill to Loveland's Council late last week starting
with the comment, "
As you know..."  Attached to Cahill's email was a November 29, email by HNS real
estate broker Don Mackey of RE/MAX Alliance asserting the per square price of the property HNS is buying
is lower than what the city staff calculated.  Mackey is not only the real estate broker for the transaction
but also a board member and official secretary of HNS.  Mackey's email to Cahill states,

"Our contract price is $3,200,000. The seller has agreed to contribute $250,000, leaving a net purchase
price of $2,950,000. Divide this price by the 42,254 square feet and you will get $69.81 per square foot.
Not an exorbitant price in my mind."

In his email to council, Cahill claimed his discussions with HNS over the last few days focused on assistance
in two parts; a purchase price of $275,000 and a gift or "grant" by city taxpayers of $275,000 for HNS to
achieve the same total of $550,000 as previously discussed.  Cahill explained the lower purchase price will
avoid creating
"excessive future comparable for downtown properties."  

Cahill's proposal appears illegal on its face since it implies the city's only motive in creating a second
contract outside the real estate transaction is to avoid higher property appraisals for future transactions.  
Since a $275,000 city "
grant" is clearly dependent on the transaction itself, not recording the grant as part
of the transaction would be a textbook case for tax evasion.  Clearly, people involved in real estate
transactions don't enjoy the option to "
grant" the seller some money outside the official property
transaction simply to avoid a higher appraisal (
as Cahill suggests) or to avoid paying higher future property

Despite the advanced nature of the ongoing negotiations surrounding the city's acquisition of the HNS
property, no appraisal report has yet been obtained by the city.  Gregory Wild, hired by Loveland to create
the appraisal, verbally provided the values he will arrive at in the appraisal.  According to Cahill's email,
Wild reported the cost approach will yield a $565,000, the market approach can justify a $625,000
appraisal while the income approach will value the property at $630,000 thus creating an overall
appraisal of $600,000.

What Will The City Do With the Property?

Since the city has no current plan to acquire HNS's current property on Cleveland there has been no public
deliberation on the question of what the city will do with the property once they purchase it.  
LovelandPolitics has learned city staff is advocating they flip the property similar to the plan when the
controversial 402 property was acquired.    Cahill has apparently bought into the idea the city might make
money by dividing the land while demolishing the HNS building to allow new retail.

Currently, Loveland's Council approves annually $1 million for "downtown development" that acts like a
slush fund and emergency money for land acquisition in the downtown area.

LovelandPolitics isn't aware of any member of the City Council taking a public position on the project.  The
council's December 18, meeting when the final decision must be made is likely the only opportunity the
public will have to comment on the acquisition and see where their councilors stand on the issue.
Saddlenotch LLC

Saddlenotch LLC, according to
Colorado Secretary of State
records, is registered by Gloria
Preuss of Loveland.  Saddlenotch is
a name closely associated with the
Preuss family of Loveland who
named the road to their home
Saddle Notch Road which is the
same address as Saddlenotch LLC.

Gunter and Gloria Preuss reside in
a 10,000 square foot home west of
Loveland (2480 SADDLE NOTCH RD)
of Highway 34 on a 376 acre ranch
featured on HGTV.

Gunter Preuss also owns
Innovations Inc. located in east
Loveland at 4004 Medford Drive.

Gunter's father, Leo Preuss,
emigrated to Loveland from
Germany 52 years ago.  Leo Preuss,
who served in the German Army
from 1940-1944, was a woodworker
who crafted furniture and cabinets.  
Leo Preuss passed away in 2001.

According to city sources, HNS is
purchasing two of the three
properties owned by Saddlenotch
on 11th Street.  Gunter & Gloria
Preuss bought the three properties
for $4.7 million in early 2011.
City Staff Plans
Mercy Property Acquisition
Owner            Address        Assessed     

Saddlenotch  1303 E 11th  $  925,000

Saddlenotch  1511 E 11th  $1,650,000
Total Assessed Value       $2,575,000
Purchase Price                 $3,200,000
Less donation                  
 $   250,000
Purchase price                  $2,950,000