LandCo sues Springs, USOC over development deal

LandCo Equity Partners sued Colorado Springs and the U.S. Olympic Committee on Friday, alleging that the city and the Springs-based USOC have failed to live up to their end of a year-old agreement among the three parties to provide a new headquarters building and other facilities for the sports organization.

The suit, filed in U.S. District Court in Denver, asks that the city and USOC be ordered to comply with the terms of the March 31, 2008, agreement. Also, the suits asks that LandCo be awarded unspecified damages as a result of the city and USOC not complying with the agreement, as well as further damages for violations of federal due process law.
The lawsuit's key allegation is that city has failed to reimburse LandCo for money it spent buying and renovating the downtown building intended for the USOC, LandCo has been put in a financial hardship, the suit alleges, because the firm faces losing the building because it can't repay a construction loan it took out to do the work.

Colorado Springs Mayor Lionel Rivera and Assistant City Manager Mike Anderson were named as defendants in the suit, along with the city, the city's non-profit Public Facilities Authority and the USOC. In addition to LandCo Equity Partners, other plaintiffs include three limited liability companies affiliated with LandCo.

Reached Friday night, Rivera said he hadn't seen the suit and couldn't comment. Still, he said he was "disappointed."

"I believe that we were going to work out a solution where the USOC could move into their headquarters and we would have the OTC (Olympic Training Center) plans done. That was our plan," Rivera said.

USOC spokesman Darryl Seibel said the organization couldn't comment until it had a chance to review the suit.

The lawsuit was filed days before a special City Council meeting scheduled for 4 p.m. Monday. Council members said they expect to discuss financial and legal issues surrounding LandCo and its chairman, Ray Marshall, and whether those problems would prevent him and his company from fulfilling their portion of last year's agreement. The 4th District Attorney's Office this week said that Marshall and LandCo are the subjects of a criminal investigation; LandCo and Marshall also face a series of lawsuits, liens and foreclosure actions related to various business and real estate dealings.

Marshall couldn't be reached Friday.

Denver attorney G. Stephen Long, representing LandCo, said the city and USOC will have 20 days to respond once they're served with the suit.

On March 31, 2008, after months of negotiations and with much fanfare, LandCo, the city and the USOC signed a deal to provide the sports organization with $53 million in incentives so that it would keep its headquarters in Colorado Springs, where it had been since 1978.

In the agreement, LandCo agreed to construct a new downtown office building to house the sports organization, as well as remodel a former Springs Utilities building into offices for Olympic-themed amateur sports groups and make $16 million worth of improvements to the USOC's Olympic Training Center in the Springs.

The lawsuit alleges:

• LandCo. took out a $23.5 million loan from Denver-based United Western Bank to renovate what is to become the USOC headquarters building, at Colorado Avenue and Tejon Street downtown. But, the bank reduced the loan to $10.5 million and shortened the maturity date to Nov. 14, 2008. That loan was to be repaid from the sale of the top five floors of the building to the city for $20.8 million. The city was required under its agreement with LandCo and the USOC to issue certificates of participation by Nov. 14 to fund the purchase, but hasn't yet issued those certificates or completed the purchase, the suit said. The additional $10.3 million left over after the loan was repaid was "committed to LandCo's efforts to meet its remaining obligations to the USOC and the City," the suit said.

• The construction loan was to be repaid by Nov. 14 and the loan amount "was exhausted long ago." LandCo is now "at great risk of losing the headquarters building to (United Western), and it is open to claims from the general contractor (G.E. Johnson Construction Co. Inc.) currently working on the building," the suit said.

• Beyond the $10.5 million, LandCo also has put down $5 million in cash to buy the property where the headquarters building is under construction, paid $3.6 million of its own funds on construction of the headquarters building, spent $2.5 million renovating another building at 19 N. Tejon St. for the USOC to use as temporary office space until the headquarters building is completed and lost more than $1.5 million in rent from tenants of that building that were either moved elsewhere or evicted.

• "After LandCo removed tenants and gutted the entire building, the USOC decided to use only approximately 10,000 square feet of the building," according to the suit.

• The city and USOC "demand onerous changes to the terms of the temporary office building lease. Those changes place more of the financial burden of this project on LandCo's shoulders," the suit said.

• The city and the USOC demanded that LandCo turn over the remainder of the building to the city to pledge as collateral to obtain additional funding, the suit said. The city and USOC also demand the company borrow another $6 million and its principals personally guarantee the loan and that the "new terms" be met before the USOC signs a lease for the headquarters building allowing the city to issue the certificates to buy the five floors of the headquarters building.

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