In 1977, Les Gruen’s boss walked into his office and threw a map of Colorado Springs on his desk with the city’s eastern flank circled in yellow.
“He said, ‘Go check it out,’” Gruen recalled recently.
Gruen was working for Mobil Land Development Corp. in San Francisco, and that fact-finding mission brought him to Colorado Springs and introduced him to the long, troubled history of Banning Lewis Ranch.
When the property’s current owners, Banning Lewis Ranch Co. LLC, declared bankruptcy on Thursday, it was only the latest chapter in the ranch’s star-crossed history. The huge, 21,400-acre ranch has seen more than 40 years of stops and starts, and its most numerous residents are still cows and antelope.
Despite it all, to many people the ranch remains the key to Colorado Springs’ future. And today, for the cows, antelope and the few hundred people who call Banning Lewis home, life goes on just as it did before the bankruptcy.
It’s not that the land is cursed, exactly. Several of its long line of owners came out ahead, notably Mobil, which in four years of ownership sold off enough bits of the land to recoup its initial investment and then made a killing selling the bulk of the property to developer Frank Aries for $92 million, Gruen said.
“People were paying phenomenal amounts of money for land out in the middle of nowhere,” he said.
Gruen and his colleagues at Mobil used to argue how long it would take to develop the ranch, which made up a third of the city’s size after it was annexed in 1988.
“There was a debate among the people I was working with as to whether it was going to take 100 years or 200 years to develop that parcel,” he said.
Mobil’s successors had much shorter timelines in mind, but Banning Lewis seems to move according to its own clock.
Aries couldn’t make the payments on his loans and in 1989 handed the property back to the bank — which was itself embroiled in the savings and loan fiasco. Banning Lewis ended up in the Resolution Trust Corp.’s hands, where it languished until a company controlled by Saudi billionaires bought it for $18.5 million in 1993. As the local economy recovered, though, Banning Lewis sat. And sat.
In 2001, Capital Pacific Holdings of California bought it from the Saudis for $55 million. The timing couldn’t have been better. The local housing market was red hot and homes were popping up everywhere in the Pikes Peak region.
But instead of building like crazy, Capital Pacific’s Banning Lewis Ranch Management Co. wound up in court with a group of minor property owners over who should pay for what pieces of the development and got tangled up working out water and wastewater deals with Colorado Springs Utilities. The management company’s strategy of hand-picking builders and a very deliberate roll-out of communities might have also worked against it.
It was 2007 when the bulldozers finally rolled in and January 2008 when the first moving van arrived.
And now, the ranch’s ownership is in bankruptcy. (See the Q and A for more details on what that will mean).
A different roll of the dice and Banning Lewis might be teeming with subdivisions by now, Gruen said. If Banning Lewis had gotten an earlier jump on development, it’s possible the thousands of homes in unincorporated Falcon and surrounding developments that bypassed the ranch might never have been built.
What happens to the ranch’s development after bankruptcy is difficult to predict. Will the current owners still have possession of the property? Will a different development team be in place? Will the property be sold?
“This is the first day in what will be a very complicated and extensive process,” said veteran Colorado Springs developer Steve Schuck, who almost purchased the property before Capital Pacific stepped in.
“I suspect Banning Lewis will end up being developed by the current team, because nobody understands the property better than they do,” Schuck said. “What would be the benefit of changing riders? It doesn’t make any sense. The horse has to be ridden and these guys know how to ride it better than anybody.”
Schuck is sure of one thing: There’s “zero chance” anybody would buy the entire 21,400 acres after bankruptcy, if it were put up for sale: There’s little money available to borrow, and less likelihood that a buyer these days would have the patience to wait 25 to 50 years to complete the development.
Even as bankruptcy gives owners time to sort out their problems, it could create a sense of doubt on the part of builders, buyers and real estate agents, Schuck said.
Real estate agent Hank Poburka of The Platinum Group said the bankruptcy could create an image problem for Banning Lewis if it drags on.
“I think the impact is going to be minimal if it’s (the bankruptcy) done quick, and it’s going to be major if it takes a long time,” Poburka said.
Ultimately, time is on Banning Lewis’ side, said City Councilman Randy Purvis, who also served on the City Council that agreed to annex the ranch in 1988. Colorado Springs really only has one direction to grow in, he said, and Banning Lewis will be there when the city is ready for it.
“The land’s going to stay there,” Purvis said. “I think the advantages that Colorado Springs has over the other parts of the country remain solid. As we go forward, the city will continue to grow.”
Time. It’s always been a matter of timing for Banning Lewis, Gruen said.
“Here you had this beautiful piece of property that’s had these fits and starts over all these decades,” he said. “Timing is so important in real estate. A lot of people say, ‘Location, location, location,’ but timing has a tremendous amount to do with how things evolve.”
Call the writer at 636-0275
BANNING LEWIS Q AND A
Question: What does the bankruptcy mean to homeowners in Banning Lewis?
Answer: Nothing immediate, said John Cassiani, vice president for project operations at Banning Lewis Ranch Management Co. Services such as landscaping, a pool, fitness center and recreation center are paid for by the Banning Lewis metropolitan district, which is financed by monthly homeowner fees and a special property tax, he said. That district currently has no bond issue debt.
Q: Does the bankruptcy mean development and building simply stops in Banning Lewis?
Most of the development groundwork is already laid in Banning Lewis’ first residential area, southeast of Woodmen and Marksheffel roads. Streets are paved, parks and trails are in place, the recreation center opened in 2007 and the Banning Lewis Ranch Academy school opened in 2006.
“We built everything upfront,” Cassiani said. “They’re all done and people can use them.”
About 200 families live in the Banning Lewis Ranch; 250 homes have been built; another 250 home sites have been sold or are under contract to builders; and about 350 additional lots are for sale, according to Cassiani.
Jay Walther, Colorado Springs division president of Oakwood Homes of Colorado, which is one of Banning Lewis’ builders, said Oakwood is currently constructing eight homes in Banning Lewis, and plans to go forward with the purchase of 40 to 50 more home sites it has under contract.
Classic Cos., the Springs largest home builder, also plans to continue its construction in Banning Lewis.
Q: How does the bankruptcy affect the Southern Delivery System?
A: It won’t. Dave Grossman, a spokesman for Colorado Springs Utilities, said the pipeline project was never intended just for Banning Lewis Ranch and that the city needs the added capacity no matter what happens with the development’s bankruptcy.
The recession and the housing slowdown changed Utilities’ short-term growth projections, he said, but not the long-term need. Because of that, Banning Lewis’ bankruptcy is unlikely to change water rates for the rest of the city.
“We don’t expect the (Banning Lewis) bankruptcy to change the long-term rate of development and therefore we don’t expect it to have an effect on water rates,” he said. “There will be a need for an additional water supply in any scenario we are looking at.”
Q: How does the bankruptcy filing impact Falcon School District 49’s $125 million bond election on Nov. 2?
A: Little of Falcon School District 49’s growth is coming from Banning Lewis Ranch, said D-49 spokeswoman Stephanie Wurtz Meredith. It is growth from other developments in the district that have led to current overcrowding problems and the need for the bond issue.
“None of the projects in our bond issue involve building schools or facilities in the (Banning Lewis) development, as that is not one of the district’s fast-growing areas,” she said. “We do not see the bankruptcy having any significant impact on the district.”
The district’s current property tax base is nearly $700 million, according to the El Paso County Assessor’s Office, although it’s uncertain how much of that comes from Banning Lewis.
Q: How does the bankruptcy affect the city’s 1988 annexation agreement — which spells out what city services are provided and the developer’s responsibilities — with Banning Lewis?
A: “The short answer is: We’re not sure yet,” said city spokesman John Leavitt. “The bankruptcy could very well affect the agreements the city has with Banning Lewis Ranch. It hasn’t yet matured enough for us to know for sure.”
Andy Wineke and Rich Laden/The Gazette
BANNING LEWIS RANCH CHRONOLOGY
1897: William Marion Banning starts Banning Ranch near Colorado Springs.
1927: Raymond W. “Pinky” Lewis, husband of Ruth Banning, begins buying land east of Colorado Springs to expand the ranch and sells the original Banning Ranch. By the early 1930s, he expands the Hereford cattle ranch to 38,000 acres stretching from Falcon to Widefield by absorbing four smaller ranches in 43 different transactions.
November 1963: Phoenix-based Lawrence & Stegall Colorado Properties Inc. buys 23,670 acres of the ranch from Lewis for an undisclosed price.
March 1965: Lawrence & Stegall defaults on a loan from U.S. Steel and Carnegie Pension Trust Fund and deeds the ranch to Colorado Springs Land Holding Co., a New York-based company controlled by the pension fund.
November 1981: A subsidiary of Mobil Land Development Corp., in turn a subsidiary of Mobil Corp., buys the ranch for $22.56 million for residential, commercial and industrial development.
August 1983-May 1984: Mobil sells 1,562 acres to three groups of buyers for $18.71 million for what eventually becomes the Colorado Springs Ranch and Pheasant Run housing developments and a motel site.
October 1985: Tucson, Ariz., developer Frank Aries buys 20,483 acres for $92.05 million from Mobil. Western Savings of Phoenix makes a 10-year, $104 million loan to Aries and his partners for this and subsequent purchases.
October 1986: Aries buys the adjacent 3,631-acre Colorado Centre development for $41.3 million from L-P Associates. Western loans Aries another $33.3 million. In less than a year, he has purchased 26,003 acres for $158 million.
September 1988: Colorado Springs annexes 24,310 acres owned by Aries, including the Banning Lewis Ranch and Colorado Centre. It is the largest annexation in the city’s history.
June 1989: The ranch becomes the biggest property involved in the nation’s S&L bailout, as federal regulators take over Western Savings. Two months later, Aries deeds land to Western in lieu of foreclosure after defaulting on his loan.
March 1993: Banning Lewis Ranch Corp., a company owned by Saudi billionaires, buys most of the ranch for $18.5 million.
October 2000: Capital Pacific Holdings Inc. of Newport Beach, Calif., enters a contract to buy the ranch from the Saudis for an undisclosed price. Deal is to be completed in late 2001.
Sept. 17, 2001: Capital Pacific pays $55 million to buy 21,400 acres of ranch property. Over the next 50 years or so, the ranch will become home to about 75,000 residences and 180,000 people, the new owners say. They say their marketing strategy is to build a series of “villages” that are complete with parks, recreation centers, trails, schools and other amenities before homeowners move in.
May 2002: With little activity in sight, and the community wondering about the status of the project, Capital Pacific issues a statement saying it was “proceeding with plans to start development” of the ranch.
June 2004: The property’s ownership is restructured, with Banning Lewis Ranch Co. LLC, a newly formed holding company, paying $94.2 million to buy the ranch. It’s capitalized and managed by Makar Properties of Newport Beach, Calif, which, in turn was spun off from Capital Pacific.
August 2006: Banning Lewis Ranch Academy, the first school for the new development, opens its doors.
July 2007: Development of the ranch’s initial residential area southeast of Woodmen and Marksheffel roads — called Northree — is under way. Model homes are under construction and a recreation center opens a month later.
January 2008: The first Banning Lewis Ranch homeowners move in.
January 2009: Banning Lewis loses one of its initial builders when John Laing Homes of California halts projects in the Springs. The company later goes out of business.
2009-2010: Like most other Colorado Springs residential developments, and those around the nation, Banning Lewis wrestles with a severe slump in housing construction.
Oct. 27, 2010: Banning Lewis Ranch Co. and subsidiary Banning Lewis Ranch Development I and II file Chapter 11 petitions U.S. Bankruptcy Court in Delaware, citing more than $242 million in debt.
Source: Gazette research