Colorado Springs developer Jim Morley, who was involved in the area’s costliest foreclosure in 2009, is a candidate for that dubious distinction again in 2010.
A $14.2 million foreclosure notice was filed last week against two limited liability companies that Morley formed as part of his 2006 purchase of the 156-acre Appletree Golf Course and an additional 220 acres in Fountain, south of Colorado Springs. Morley had planned to upgrade the golf course and develop more than 260 nearby home sites, but the golf course has been closed since late 2006.
The Appletree foreclosure filing is the largest dollar amount for any filing this year in El Paso County, according to records compiled by the El Paso County Public Trustee’s Office, which processes foreclosure actions.
In August 2009, Morley and a partner were hit with a $25.2 million foreclosure on 2,300 acres in unincorporated Black Forest, northeast of Colorado Springs, where they had planned to develop an upscale residential project known as Sanctuary in the Pines. That property was deeded to a suburban Kansas City, Mo., bank in April.
The foreclosure actions are signs of the times for residential and commercial property owners and developers in Colorado Springs and around the nation. Because of the housing downturn, residential developers have been unable to sell enough home sites to pay off loans they had obtained to buy their property. Likewise, as the recession dragged on, many businesses closed their doors in shopping centers and office buildings; some commercial developers and land owners saw their incomes dwindle as a result and weren’t able to pay off loans they used to buy and develop their properties.
In the case of the Appletree Golf Course, Morley Golf LLC and Appletree 220 LLC have an outstanding balance of $14.2 million on an original loan of $18.2 million, according to the foreclosure filing.
The original loan was with Columbian Bank and Trust Co., a Topeka, Kan., bank taken over by the Federal Deposit Insurance Corp. in August 2008.
In February of this year, the FDIC sold the loan as part of a larger loan sale; it’s now held by a limited liability company formed by Rialto Capital Management LLC, a Miami-based real estate investment management company, according to a list of loan sales on the FDIC’s website.
The limited liability company filed the foreclosure action against the golf course property.
The foreclosure filing begins a legal process that can lead to the loss of the property. It’s scheduled to be sold at a Public Trustee’s auction Feb. 2, although deals can be worked out to forestall the sale.
Morley blames the government for the situation; his limited liability companies sued the FDIC last month in U.S. District Court in Denver, alleging the federal agency failed to allow loan proceeds to be used to fund improvements at Appletree. Those upgrades would have included a clubhouse and 262 residential lots on and around the golf course, the lawsuit alleges.
“They say we owe them money,” Morley said in an interview.
“I say, if they funded all the improvements, we’d be an operating entity going forward and generating revenue from a golf course and selling a couple of (home) lots every month.”
Greg Hernandez, an FDIC spokesman in Washington D.C., said the agency doesn’t comment on pending litigation.
Generally speaking, he said, the FDIC doesn’t function as a bank, but instead works to get assets of failed banks back into the private sector by selling them individually or pooling them for sale.
If he’s able to reach a deal on the foreclosure, Morley said he’s seeking to reduce his debt load on the property.
While he added that he expects “something to get worked out,” he doesn’t know for sure if he’ll wind up in control of the golf course.
In addition to the foreclosure action, several mechanic’s liens — legal claims for unpaid or disputed work — are pending against Morley Golf, according to El Paso County Clerk and Recorder’s Office records.
Contact the writer at 636-0228.