Investors lose in Falcon Vista

FALCON - Falcon Vista will be a gold mine.

Build a duplex in the 45-acre subdivision southeast of U.S. Highway 24 and Meridian Road, rent it out and enjoy positive cash flow for years.

How can you lose when growth in El Paso County is soaring, nearby military bases generate renters and the lots offer scenic views of Pikes Peak?

That sales pitch, made in 2005 at the Denver Tech Center office of Mile High Capital Group and elsewhere, drew more than 50 investors between February and August from Colorado, Texas, Oklahoma and California.

What they bought was fool's gold.

"I'm sitting on a piece of dirt," said one investor from northern Colorado who wished to remain anonymous. He said he got taken for $116,000.

Of the 24 units in Falcon Vista, four are finished and rented. Others appear more fit for mice and birds than humans. In one, chunks of sheetrock, stray pipes, boulders and tumbleweeds pile up inside a doorless garage. In another, doors hang from a single hinge, windows are shattered and foot-size holes puncture the walls.

It's all that's left of dreams of a financial windfall advanced by a man prosecutors say used people's hard-earned cash to drive his ego as a real estate wizard.

But since the county stepped in 18 months ago, things are turning around. In late March, the site showed signs of life. Electricians worked to replace wiring in one unit after vandals stripped it, and a crew poured a driveway at another. Investors think Falcon Vista now has a chance.

A record of bad-faith deals

Fredric Dryer was no stranger to real estate scams. He was convicted in the 1970s in Wisconsin and in the 1980s in Boulder for ripping people off in schemes identical to the Falcon Vista fiasco, said Denver Chief Deputy District Attorney Kandace Gerdes. She helped prosecute Dryer and two cohorts who pleaded guilty and testified at Dryer's trial.

Dryer's lawyer blamed others, saying Dryer was the scapegoat for their misdeeds, according to an account in the Los Angeles Times.

Dryer, 60, was sentenced in February to 132 years in prison on 44 felony counts of securities fraud, theft and violation of the state's organized crime laws - activities one expert called a "Ponzi scheme."

Lured by radio ads promising good returns on investment properties, the northern Colorado investor and about 25 others attended a "seminar" at the Denver Tech Center office of Mile High Capital Group in early 2005.

It was one of many meetings Dryer hosted for several projects, Gerdes said in her opening statement at Dryer's trial. She said he traveled the country "promoting promises and schemes at luxury hotels, convention centers and grand ballrooms," where he "spared no expense" on lavish seminars, the Denver Business Journal reported.

"The pitch was you build a duplex and rent it out, and it's positive cash flow," the northern Colorado investor said. He paid $16,000 - 5 percent of the $320,000 cost of a lot and modular duplex.

He also signed a $100,000 construction loan. "That's when things went bad," he said.

Mile High officials started building some units but filed for bankruptcy in 2006.

Besides Dryer and Mile High, the investor blames the banks, because he said they allowed Mile High to withdraw loan money to buy lots for $84,000 each, an outlandish price for less than an eighth of an acre. The rest was used as a down payment on a modular unit, he said.

The Denver Business Journal reported building permits were issued on 13 duplexes while more than 35 construction loans were made to investors. The Journal also reported the Mile High contracts required construction to begin within 30 days of getting a construction loan.

That didn't happen.

The investor, who works in marketing, said he can afford the $500 monthly loan payment, but others couldn't. At least nine properties have gone into foreclosure, county records show.

A range of victims

"It was a complete cross section, from the UPS driver and the Frito Lay salesman-stocker to Ivy League-trained lawyers and doctors. It really ran the gamut," Gerdes said of Dryer's victims.

Among those were Joe and Janet McDaniel of Parker, rental property experts.

"When we got into this (Falcon Vista) we just turned 60, and this was part of our retirement income plan," Joe McDaniel said. "This basically pulled that whole rug out from under my feet. I've just gone back to work, but this is going to continue to harm us for years."

Janet McDaniel said the couple is spending their reserve funds to stay afloat.

The McDaniels were among 882 investors bilked for $44 million by Mile High, according to a report for the company's bankruptcy trustee, Gerdes said; only $2 million was spent on project development.

While some scammers spend ill-gotten gains on trips, lavish homes, luxury items and women, Dryer spent it on self-promotion, she said. He hired a videographer to record seminars held in San Diego, Los Angeles and San Francisco.

"He saw himself as a new Robert Kiyosaki," she said, referring to the real estate guru and best-selling author of "Rich Dad, Poor Dad."

Dryer spent thousands on a "high level sponsorship" of a Kiyosaki event at Adam's Mark Hotel in Denver, Gerdes said. "As a perk, he was allowed to speak."

Last month, Dryer was ordered to pay $3.4 million in restitution to 28 victims cited in the criminal case.

Although Dryer has appealed, he's expected to die in prison, she said.

"I hope he rots there," Joe McDaniel said, "but it doesn't help us get our money back or build a property."

County has a plan

After Mile High went bankrupt, the half-built duplexes were left to disintegrate and the subdivision had no roads or utilities.

A New York bank that guaranteed the company's development bond folded, leaving the county without recourse, Commission Chairman Jim Bensberg said. The county has since changed its policy to require bonds be guaranteed by Colorado banks.

Though only one of the investors is local, county officials couldn't turn their backs on the project.

County Attorney Bill Louis said the choice was to help "or let this property return to the weeds."

To rescue the project, the county persuaded four banks to loan $1.5 million to build roads, curbs and gutters and install water and sewer pipes. Property owners will repay the loan over 19 years in annual installments of $2,212 each. The county offered property owners a chance to pay the $24,193 assessment in full but there were no takers.

Of the 113 properties, the assessment was paid on 28 as of the first tax deadline Feb. 28, County Treasurer Sandra Damron said. Of those, 16 paid the full annual amount, and 12 paid half. The other half is due later. Those who don't pay risk having their property sold at a tax sale.

The county provided legal services to form the Local Improvement District and used its road crews and equipment to prepare the road beds for paving. It also chipped in $90,000 to settle a contractor dispute that cleared the way for the district to form, a payment the county hopes to recover, Louis said.

The newly formed homeowners group borrowed $325,000 to install gas, electric and telecommunications service, for which property owners will pay $230 per quarter for 10 years.

Commissioner Amy Lathen, whose district includes Falcon Vista, took office after the deal was made but agrees with it.

"Having something like this in an area like Falcon reduces other property values," she said during a recent visit to the site. "We don't want something like this in the county. It's like a Third World out here."

Investors are thankful, but until the market recovers, they have few options but to throw good money after bad.

"We would like to sell this lot," Janet McDaniel said. "We're just throwing money down the drain every month."

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Call the writer at 636-0238.