Commissioners: County protected in Stratton Flats deal
Eagle County has a dramatic shortage of housing affordable for its workforce. Our latest study shows we need 3,400 affordable homes. To help address this affordable housing shortfall, we approved funding of 226 affordable, local-resident units at the Stratton Flats development.
Questions have been raised about how the Stratton Flats public-private partnership was formed and how the County’s interest is protected. This column is intended to answer some of these questions.
We encourage you to stop by the project. The Stratton Flats sales office is open daily.
What is Stratton Flats, and why did Eagle County get involved?
Stratton Flats is a residential development in Gypsum. It was originally a market-rate development for 339 single-family homes, townhomes and condos. With the county’s involvement, 226 units are affordable and restricted to locals. Condos start in the $170,000s and single-family homes start in the $340,000s.
How is the county involved?
The county invested $4.5 million, creating more than $10 million in price reductions. This savings has been rolled back into the project to lower prices by as much as $70,000 per unit.
How is the Town of Gypsum involved?
The Town of Gypsum waived $2.6 million in impact fees.
The homes are modular and they are at the end of the airport. How will these factors affect quality of life for Stratton Flats residents?
Today’s modular technology is excellent and arguably superior to on site, stick-built construction. Modular construction decreases building costs and the time it takes to go on the market. The noise levels at Stratton Flats are comparable to those throughout the town of Gypsum.
Will the project actually be built? Does it have financing (money) to actually build the homes?
Stratton has been financed and almost the entire infrastructure for the first phase is complete. Homes are scheduled to be ready for occupancy this year.
How is the county’s interest protected?
The county is in second position behind the construction lender to recover its $4.5 million plus 6 percent interest. Proceeds from the sale of homes first go to pay the lender, then the county. Only after the county is completely paid is the developer paid any profit.
What is a deed of trust, and why doesn’t the county have one?
A deed of trust is a recorded interest in land. The executed development agreement between the county and the developer has well-defined cure rights that allow the county to take title of the property in the event of foreclosure, giving the county rights very similar to a deed of trust. The county also has the option to acquire Stratton Flat’s construction loan from its bank.
Does the developer get paid anything before Eagle County gets its money back? If so, why?
Yes. The developer gets to take 80 percent of its management and general contractor fees for the first 47 months. This amount is required to pay the developer and general contractor’s staff during the multi-year course of construction. Up to $500,000 of this fee is deferred until Eagle County has fully repaid principle and interest.
What incentive does the developer have to stay and finish the project?
If the developer doesn’t finish the project, then it cannot collect any profit from the development, and it forfeits the $500,000 in accrued developer fee. Failure to finish also gives the county the right to take over the project, taking title to the land. Finally, the developer has personally guaranteed the construction loan rendering the developer personally liable for any deficiency.
How did the county arrive at this structure, and what diligence has it performed?
The county engaged a team of lawyers, including real estate, and bankruptcy specialists, as well as finance and construction professionals to examine the deal. This diligence team reviewed the developer’s financials and its track record. Members of the diligence team also visited the factory of the modular manufacturer and drafted, reviewed and approved all of the contracts.
How does the county know the developer is paying its subcontractors and is on budget? What protects against liens by subcontractors not being paid?
The county performs diligent reviews of the developer’s financial records, its construction draws and inspects the physical work. The bank also performs its own similar diligence. The county holds weekly meetings with the developer to receive updates on the current status of the project.
If there are unpaid subcontractors, the county will find out during this process.
Are units selling as expected?
Yes. Contracts and reservations currently total 19 units in the first release; of these, 15 units are deed restricted.
The Eagle County Commissioners are Sara Fisher, Arn Menconi and Peter Runyon.