Banning Lewis developer files Chapter 11 bankruptcy

The owners of the Banning Lewis Ranch on the far east side of Colorado Springs filed Thursday for U.S. Bankruptcy Court protection from its creditors.

The Banning Lewis Ranch Co. LLC and its subsidiary, Banning Lewis Ranch Development I & II LLC, filed Chapter 11 petitions in the U.S. Bankruptcy Court in Delaware, citing more than $242 million in debts. The two companies own the 21,400-acre ranch that stretches from Woodmen Road to Fontaine Boulevard between Marksheffel and Meridian roads.

The massive ranch makes up most of Colorado Springs’ east side. The city annexed the property in 1988, a move that at the time added a parcel the size of Fort Collins to the Springs’ boundaries. The property moved through several sets of owners before development finally began in 2007 and the first residents arrived in early 2008.

With the nationwide housing bust, though, development in Banning Lewis barely got going. There are about 200 families living in the huge area, and lots for 50 more homes have been sold. That’s a world away from the 75,000 residences and 180,000 people Banning Lewis was predicted to house when it is fully built out — a process expected to take 50 years or more.

Still, more than $75 million has been spent on roads, water and sewer lines and recreation centers in the last few years.

Mary Ellen McNally, who served on the Colorado Springs City Council when Banning Lewis was annexed, said the news was disappointing, but not surprising given the economy.

“That was a really big deal for Colorado Springs to have that development on the east side of town,” McNally said. “That’s a shame. We’ll just have to hope for the future.”

Mayor Lionel Rivera, elected to the council nine years after the property’s annexation, called the bankruptcy an unfortunate reflection of the nation’s troubled economy. But the bankruptcy means the developer is reorganizing its debts, and he expects the project to move forward.

“The size of this bankruptcy is probably small compared to those in New York, Chicago and Boston for land development,” Rivera said. “I don’t think this bankruptcy is unique.”

The Southern Delivery System, the city’s planned $880 million water delivery pipeline, was being built to serve Banning Lewis, but Rivera said the project always has been planned to serve other developments as well, and to provide a back-up water source. The project’s completion was changed to 2016, anticipating slower community growth, he said.

Councilman Randy Purvis, who also served on the council in 1988, said his colleagues of 20 years ago understood that developing Banning Lewis was a long-term project; the area remains the natural outlet for the city’s future growth, he said.

“We’ll work through the issue (and) we’ll come out on the other side in three or four years,” Purvis said. “The city is only going to grow in one direction.

“The land’s not going anywhere.”

Nor is the development company, at least right away. Under Chapter 11 of the U.S. Bankruptcy Code, debtors continue to operate, restructure their finances and come up with a plan to repay creditors, including altering the terms of lending agreements and other contracts.

The bankruptcy is the latest in a string of delays and detours for developing Banning Lewis that date to the 1960s.

Les Gruen, owner of Urban Strategies, a local commercial real estate and planning company, was sent to Colorado Springs in 1977 to evaluate the property for Mobil Land Development Corp. and has watched its ups and downs ever since. The ranch has been returned to the bank, embroiled in the savings and loan meltdown, ignored by absentee Saudi owners and leap-frogged by developments to its east in unincorporated Falcon.

“It’s really unfortunate for a parcel that is as beautiful and as strategically located as it is that it hasn’t been developed under more cohesive ownership,” Gruen said.

Banning Lewis Ranch Co. LLC owes $242.4 million to six creditors, although all but $65.6 million is owed to partners or related entities, according to documents filed with the bankruptcy. The two largest creditors are Greenfield BLR Partners LP, owed $70 million and KeyBank, owed $65.6 million. Banning Lewis Ranch Development I & II LLC owes $186.7 million to its 20 largest creditors, although all but $1.2 million is the same debt owed by its parent firm.

The companies said in the filing that they sought bankruptcy protection “due to uncertain economic and financial conditions generally, and the financial condition of the company.”

The ownership group said in a statement Thursday that “the capital partners of Banning Lewis Ranch decided that filing for the restructuring of the finances was the best way to move the project forward.” None of the partners returned telephone calls Thursday.

The bankruptcy filing said two of the three partners in Banning Lewis Ranch Co. LLC, Greenfield and Farallon BLR Investors LLC, took the action to “break the deadlock” between them and a minority partner, Makar BLR Investors LLC.

The three partners “were unable to agree upon a proposed action in respect to the company’s and the subsidiary’s financial condition, liabilities, liquidity position, and the strategic alternatives available to the company and the subsidiary,” the filing said.

Greenfield is controlled by Greenfield Partners LLC, a South Norwalk, Conn.-based company that manages six partnerships that have invested $2.09 billion in real estate nationwide. Farallon is controlled by Farallon Capital Management LLC, the world’s 12th-largest hedge fund manager. Makar is controlled by Makar Properties LLC and headed by Hadi Makarechian, a Newport Beach, Calif., home builder and developer.

Makar last year lost St. Regis Monarch Beach Resort and the Wyndham Orange County hotel, both in southern California, in foreclosure and transferred a 32-acre hotel site, also in southern California, to Farallon.

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Contact the writer at 636-0234.