Loveland, February 2010

The national real estate bubble is estimated to have peaked sometime in the summer of 2006.  From 2006
to 2008, the decline of real estate values in Colorado and across the country was the greatest recorded
since the Great Depression.

During that same period of time, the City of Loveland began buying properties in downtown Loveland as part
of an ambitious plan to bring the old city center back.  Since the early 2000’s, Loveland had shifted its focus
towards the east by providing subsidies measured in decades and tens of millions of dollars to McWhinney
Enterprises’ Centerra while downtown struggled for relevance.

Fixing Loveland’s dilapidated downtown became a cause célèbre as candidates for Loveland’s City Council
competed with one another in 2007 to show a higher level of commitment to revitalizing the area than any
other candidate for office.  A lack-luster URA (Urban Renewal Authority) and excessive numbers of drug
addicted and homeless wondering around downtown kept most well healed private investors away.  

Despite the national real estate crisis that began impacting residential and later commercial property values,
some real estate speculators made record profits in downtown Loveland when selling to the City of Loveland
during that decline.  It would seem illogical that the city, a cash buyer in a down real estate market, would be
paying record high prices for property but that is exactly what happened.

Mike Scholl, Loveland City Planner, once described Loveland as a “clumsy buyer” given the drawn out
process of council approval, money appropriation and inability to keep their interests secret.  This may
explain some of the mark-up for city taxpayers but certainly not all as some appear to be marked-up more
than others.

A retired local real estate broker surveyed City of Loveland property purchases from 2007 until 2010 for
LovelandPolitics early last year.  She discovered the city regularly pays more than other buyers of like
properties and discovered some sellers, more than others, appear be over-compensated when selling to the
city.  It is important to note the City of Loveland does obtain appraisals when buying properties but the
appraisals also appear to be inflated.

One example is College and Mountain Properties LLC.  In January of 2006, this partnership paid $325,000
for the property located at 225 E. 4th Street in downtown Loveland.   By November the following year, the
City of Loveland paid them $475,000 for that same property.  A profit of 46% during one of the worst 1 ½
years of property devaluation in this country’s history raises questions.  Even during the real estate bubble,
making $150,000 by holding such a property for 18 months would be considered extraordinary.   Larimer
County’s assessment, which normally runs 18 months behind market value, assessed the property for a total
value of only $294,600 when the city paid nearly half a million dollars for it.

The City of Loveland paid above assessed values for all properties acquired in downtown Loveland.  The
City of Loveland paid a total of $1,097,100 above assessed values for seven commercial properties it
purchased between 2006 and 2010.  During that same period, private party transactions in downtown
Loveland reveals buyers paid an average of 20% to 30% below the Larimer County assessed value of like
properties.  In fact, a member of Loveland's own City Council who voted to acquire these properties at
higher and higher prices was himself a beneficiary since he owned a neighboring property that benefited
greatly from the increasing valuations.

Then Councilman Larry Heckel acquired what is now known as the Pourhouse Bar and Grill in downtown
Loveland on January 3, 2006 for $305,000.  That property, located at 124 4th Street, was purchased at the
top of the real estate bubble for a fraction of what the city later paid for similarly situated properties during
the general decline in prices.  Heckel later borrowed more than $700,000 against the same property he
bought for $305,000.  It is important to note he also made significant improvements to the property which
contributed to its increased value.

Who exactly profited from all the sales of higher prices for the city is sometimes difficult to determine.  In the
case of 319 N Lincoln, the seller is a private limited liability company (LLC) whose owners apparently don’t
want to be identified.  The property was bought by Armada Holdings in 2005 for $369,000 and sold to the
City of Loveland in 2009 for $612,400.  That same company changed its name or ownership of the property
in 2008 to G and H Holdings LLC which sold the property to the city.

Loveland’s ‘Old Guard’ council purchased the now infamous 98 acres along Highway 402 and I-25 on
November 6, 2007.  That same night, Loveland voters elected a new majority onto Loveland’s City Council
with promises to focus development away from I-25 and back onto Loveland’s fledgling downtown.  The city’s
efforts to revitalize downtown were popular thus few questioned the prices the city was paying for property.

Today that trend continues with the city investing even more funds into Loveland’s downtown.  Chad
McWhinney is fond of telling people that success is getting in front of the inevitable.  When it comes to
investing in downtown Loveland commercial property, success may be getting in front of the city’s
acquisitions.  This guarantees selling for the highest possible price.
Loveland's Independent News Source
Did Loveland Over Pay For Downtown Properties?
one retired broker says they did
Former Councilman Larry
Heckel is one downtown
Loveland property investor
who benefited from the city
buying properties in downtown
for higher prices during a
declining market.