Lakewood agreed to an interest-free loan for up to $2.75 million, for Texas-based developer Artesia Real Estate Investments. The money will be used to demolish the old Sears buildings at 10785 W Colfax Ave. The Lakewood Reinvestment Authority (LRA) Executive Director Robert Smith says the rampant crime at this vacant property justifies using city funds for private property demolition. The number and cost of service calls could not be stated but apparently, Lakewood has desired to demolish these buildings for years. The developer was not present to answer any questions and Lakewood did not ask anything in return, such as affordable housing or even a credit check. Lakewood will spend about 67% of the available redevelopment funds on this project but high property taxes could refill the coffers soon. The loan could also be forgiven completely in return for something like affordable housing units later.

LRA Executive Director Smith argues that this loan helps Lakewood because Lakewood will have lower crime due to being a vacant property, rather than a vacant building, for approximately 18 months that it otherwise wouldn’t have. The crime reportedly comes from homeless residents occupying the property.

The justification seems to be that demolishing the building is a high-priced equivalent of sweeping a homeless camp.

The loan also helps the developer. Smith reports that developers are hesitant to eliminate buildings on their own because it might lower the mortgage value of the property.  There was no word on how a city loan will not lower the mortgage value but the developer of the Holiday Shopping Center accepted a similar deal to demolish that building in 2023.  Smith argued that tearing the building down saves the private entity a potential loss through fire and the cost of private security.

The funds for the Sears demolition will come from the LRA through the West Colfax Avenue Corridor Reinvestment Plan. These funds were planned in 2005 but not used until now since the owners would have to agree. Smith says Lakewood has been looking for owners to combine parcels, demolish, and work with the city for years.

Smith also explained that the developer needed building permits, some from the city, which have not been granted yet. These permits cause delays in demolition.

The previous loan for the Holiday Shopping Center demolition was advertised as a pilot project, however, the results are inconclusive as to whether the project was a success. Demolition did occur but no evidence of expedited development or repayment of the loan was offered. Lakewood is not letting that stop them from making the same kind of loan with the same kind of questions on whether Lakewood will get their loan repaid.

This loan for vacant property comes on the heels of Lakewood approving a new fee on vacant properties, which was supposed to incentivize property owners to handle these problems on their own. Apparently, some owners will be able to get special deals to have the city pay for mitigation, although the legal department offered the opinion that Lakewood is not, in fact, paying for anything since it’s just a loan. This loan will allow the developer to save money on private security for the vacant property.

No other spending alternatives were presented that would allow economic development and job creation in this struggling area. The proposed development would be market-rate apartments, with some mixed use. In Lakewood, “mixed use” has historically been solely market-rate apartments, rather than a true mixed commercial and residential use.

Lakewood did not take the time to check the credit status or financial background of the developer, in order to expedite the process and maximize public safety. No city staff had to be dedicated to going through the steps a bank would take in order to lend money.

Lakewood also did not have to run a business case to show how much money Lakewood was spending on service calls, versus how much money the developer was currently spending. The discussion also did not differentiate what was a public versus private threat, such as the building burning down. No mention was made of where the homeless residing in the building would be moving to.

The city attorney present explained that it would be possible to forgive the loan later, in return for including some affordable units. The feeling was that the interest-free loan was not enough of an incentive for them to provide affordable units.

See the BusinessDen’s coverage of this issue here.

Councilor comments:

Shahrezaei: Says she’s been looking forward to this since 2021. Asks for how many service calls there has been to this area but that number was not available. She is supportive of the West Colfax redevelopment plan in general.

Wolfram: Seeks clarification of the lien process

Cruz: Seeks clarification on how interest-free loans to private entities work. Executive Director Smith responds that Lakewood has always maintained a policy of not lending to private entities until last year’s loan for the Holiday Shopping Center so now there is a precedent.

Nystrom: Was concerned with a zero-interest loan. Asks why Lakewood needs to step in since this was an anticipated part of development. Also has concerns that this loan contradicts the Colorado Constitution Article 11 prohibiting public indebtedness. Asks whether loan forgiveness is precluded (answer – no).

Mayott-Guerrero: Says she’s focused on resident requests for public safety.

Rein: Likes removing the vacant building. Asks whether the lien is for all the property parcels or just where the vacant building is. States that the developer could redevelop all around the demolished buildings and Lakewood would be on the hook. 

Low: Clarifies that the public benefit is the time without the public nuisance building. Clarifies that the loan would have to be repaid no matter what.

Strom: Says this is about the benefit to the community, not a benefit to the developer.

Scorecard: Provide developer loan for building demolition

Unanimous Approval from all Present:

Chair, Wendi Strom

Cindy Baroway, Commissioner
Isabel Cruz, Commissioner

Andy Kerr, Commissioner

Jacob LaBure, Commissioner 
Roger Low, Commissioner

Sophia Mayott-Guerrero, Commissioner

David Rein, Commissioner

Jeslin Shahrezaei, Commissioner
Glenda Sinks, Commissioner
Rebekah Stewart, Commissioner
Carolyn Wolfrum, Commissioner

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