More than a year after it went bankrupt, Auraria Student Lofts downtown remains unsold and unmarketed while its owner and lender lob accusations back and forth.
Nelson Partners, a national student housing company, bought the 14-story apartment complex atop the Curtis Hotel at 1051 14th St. for $56 million in 2019. Auraria Student Lofts filed for Chapter 11 bankruptcy three years later and is now $59.2 million in debt.
Most of that debt is held by Fortress Capital, a national lender that has unsuccessfully tried to take over and sell the property since last June, when Auraria declared bankruptcy 57 minutes before a foreclosure sale. Last fall, U.S. Bankruptcy Judge Kimberley Tyson said that Nelson had mismanaged Auraria but refused to let Fortress sell it.
Now, seven months later, Fortress is asking again.
When Tyson ruled in favor of Nelson last year, the plan was for Nelson to sell the property by August 2023, pay off its debts and emerge from bankruptcy. But it hasn’t even marketed the property for sale, according to Arthur Steinberg, an attorney for Fortress Capital.
“Since October 2022, the debtor has broken nearly every promise it made,” he wrote July 3.
Last month, Nelson updated its written plan for emerging from bankruptcy. Gone was any mention of when it would sell those 14 stories at 1051 14th St. Fortress sees this as proof that Nelson is using “kick-the-can” tactics to execute “a bait-and-switch” and “make a mockery” of bankruptcy laws. Fortress said either it or a neutral third party should take over.
“This case cries out for an honest broker to run the sale process in an efficient way,” Steinberg wrote to Tyson last week, proposing a plan that allows Nelson to manage the student lofts while someone else sells the building. “It has refused to ask Colliers to market the property, as it promised, so it can no longer be an effective steward to lead the sale process.”
What the property is worth depends on who you ask. Fortress said it could sell for $67 million to $74 million this year or $78 million in coming years. Nelson lists the current value at $67 million but has said that recently completed renovations could push its sale price north of $80 million.
Attorneys for Nelson did not respond to BusinessDen’s questions about Auraria, including why it hasn’t marketed the property.
Represented by a trio of lawyers from Denver’s Brownstein Hyatt Farber Schreck firm, Nelson has met Fortress’s accusations with bombast of its own in recent months.
Fortress bought Nelson’s debt in 2021 through “unethical misconduct” and then “secretly prepared to foreclose without warning” early last year, Nelson alleged May 8. Nelson said the lender’s aggression forced it into expensive bankruptcy proceedings and spooked lenders, costing it $11.9 million that should now be deducted from what it owes Fortress.
“The lender affirmatively force-fed (Nelson) poisoned fruit through its deceptive and predatory actions, making it far worse off than had the parties never met,” its attorneys wrote.
The Auraria Student Lofts took in $340,000 and spent $779,000 in May, the most recent month it reported its finances. In April, the property earned $298,000 and spent $163,000.