FACTS REGARDING THE FUTURE OF THE PARK HILL GOLF COURSE LAND
[Updated August 12, 2019]
- The Park Hill Golf Course (“PHGC”) land currently consists of approximately 155 acres that are zoned OS-B (Open Space-Recreation).
- Prior to November 4, 1997, the George W. Clayton Trust (“Clayton”) owned the PHGC land in fee simple without any legal use restrictions other than City of Denver (“the City”) zoning restrictions.
- Under the administration of Mayor Wellington Webb, the City purchased a perpetual open space conservation easement on November 4, 1997 from Clayton in exchange for $2 million paid to Clayton. Therefore, Clayton in perpetuity relinquished its right to develop the PHGC land in exchange for this $2 million payment. This conservation easement was recorded on November 25, 1997 at Reception No. 9700159758. Terms of the 1997 conservation easement agreement included the following:
- The conservation easement was perpetual.
- The specific grant language was to grant “a perpetual, non-exclusive, conservation easement in gross over and upon the [Park Hill] Golf Course Land to maintain the [Park Hill] Golf Course Land’s scenic and open condition and to preserve the [Park Hill] Golf Course Land for recreational use.”
- The stated purpose was “to vest a real property interest in Grantee [the City] that provides for the conservation of the Golf Course Land as open space and for the continued existence and operation of a regulation-length 18-hole daily fee public golf course in its present location….”
- The permitted uses included that the PHGC land “shall be occupied, used, operated, and maintained as a regulation-length 18-hole daily fee public golf course with such related uses and activities as may be accessory or incidental to the operation of a golf course including but not limited to a driving range, golf learning center, club house, restaurant and bar, and such unrelated recreational uses such as ball fields, tennis courts, etc.”
- The obligations and restrictions of the conservation easement ran “with the land and be enforceable against any owner, lessee, mortgage holder, assignee, or other successor in interest of Grantor [Clayton].”
- The conservation easement agreement could be amended by written agreement of both parties.
- On October 13, 2000, Clayton and the City entered into an agency agreement. The purpose of the agency agreement was to have the PHGC land treated as City-owned land for tax purposes so that Clayton would be relieved of all liability for indirectly paying possessory interest taxes on the land pursuant to its golf course lease. The agency agreement was recorded on December 1, 2000 at Reception No. 2000175267.
- The terms of the agency agreement included:
- The term was through October 13, 2099.
- Clayton held title to the PHGC land “as agent of the City, to hold for the benefit of the citizens of the City and the general public….”
- Upon termination of the agreement, Clayton was obligated to “grant, convey, assign, transfer, and deliver to the City…for the use and benefit of the citizens of the City and the general public, all right, title and interest of the Trust in and to the Golf Course, Golf Course Land, and all buildings, improvements, facilities, and other property, real and person, tangible and intangible….”
- The 1997 conservation easement was released.
- Clayton had the right to terminate the agreement upon 60 days’ notice, but upon such termination Clayton was obligated simultaneously to “grant a conservation easement to the City (in the form attached hereto as Exhibit I with such changes as may be mutually agreed upon by the City and the Trust) that will ensure that the Golf Course Land is used only for the Golf Course and related activities.” The referenced Exhibit I was a conservation easement with essentially the same terms as the 1997 conservation easement.
- The purpose was “to ensure that the Golf Course is managed so that (i) the Golf Course Land is preserved as open space, (ii) the Golf Course continues to operate as a regulation-length 18-hole daily fee public course in its present location….”
- The agreement could be amended by written agreement of both Clayton and the City and upon approval of City Council and the Probate Court.
- From January 1, 1999 through on or about July 11, 2019, Clayton leased the PHGC land to Evergreen Alliance Golf Limited, LP (“Evergreen”), a Delaware limited partnership. Evergreen is currently owned by Arcis Equity Partners, LLC (“Arcis”), a large “real estate and leisure equity sector” Texas private equity firm. The lease terms included the following:
- The original term was through December 31, 2018.
- The guaranteed lease payments are $700,000 per year.
- Arcis had two 5-year options to renew the lease, one of which it timely exercised in June 2018.
- Arcis had a right of first refusal to acquire the PHGC land during the term of the lease. Any such sale by Clayton would be subject to the conservation easement restrictions set forth in the agency agreement.
- In the fall of 2017, Clayton and the City administration negotiated a complicated agreement regarding the PHGC land the terms of which included:
- Clayton and the City would nullify the conservation easement.
- The City would have the right to install an approximately 25-acre stormwater detention facility in the northeast corner of the PHGC land as part of its Platte to Park Hill project.
- The City would purchase 50% of the PHGC land from Clayton for $10 million.
- The City would lease 50% of the PHGC land from Clayton for 30 years at the rate of $350,000 per year.
- Starting January 2, 2019 and continuing through December 31, 2022 the City would have the exclusive right to sell all or portions of the PHGC land at prices no lower than then “as-entitled” (i.e., then zoned) appraised market value.
- Starting January 1, 2023 and continuing through December 31, 2037 Clayton would have the exclusive right to initiate and direct sales of the property leased by the City.
- Clayton would receive the first $24 million (including the initial $10 million and the aggregate lease payments from the City) from all PHGC land transactions.
- The City would pay Clayton up to $350,000 for its development planning costs.
- After Clayton would have received an aggregate total of $24,350,000, net land PHGC land sale proceeds would be divided as follows:
- first, to the City and Clayton in equal shares until payment in full of any Clayton development planning costs in excess of $350,000;
- second, 100% to the City until it would be reimbursed the full amount of (1) its $10 million purchase price, (2) all lease payments made to Clayton, and (3) any purchase option prices and accelerated payments paid by the City;
- third, with respect to sales prior to December 31, 2017, 50% to Clayton and 50% to the City; and
- finally, with respect to sales after December 31, 2017, 100% to the City.
- Potentially all 155 acres of the PHGC land could have been developed.
- On October 3, 2017, the City administration presented the proposed agreement to the City Council Finance and Governance Committee. At the request of the City administration, however, the Committee took no formal action regarding the proposed agreement.
- On January 2, 2018, the City Council approved ordinances (1) authorizing the City to condemn a permanent stormwater detention easement and a construction easement for purposes of installing and operating a stormwater detention facility in the northeast portion of the PHGC land as part of its Platte to Park Hill project and (2) approving the related construction contract. The City advised that it expected to begin construction work in January 2019 and that the PHGC will be closed through at least mid-2020. The City stated that it would restore the PHGC land to an 18-hole golf course if Arcis exercised its 5-year option to renew its lease.
- In June 2018, Arcis timely exercised its first 5-year option to renew its lease so that the current term of its lease extends through December 31, 2023.
- In April 2018, Arcis sued Clayton in Denver District Court claiming that the actions between Clayton and the City described in paragraph 9 above constituted breach by Clayton of Arcis’ right of first refusal to purchase the land and breach of the implied duty of good faith and fair dealing. On April 19, 2019, Arcis filed a second amended complaint in which it joined the City as a co-defendant. On May 13, 2019, the City filed its answer and affirmative defenses in which it fundamentally denied all allegations.
- On November 6, 2018, Denver voters passed a 0.25% sales tax increase estimated to raise $45 million annually for the purpose of acquiring and maintaining park land to keep pace with the population growth expected to reach 900,000 by the year 2040.
- On December 31, 2018 Arcis shutdown all operations at the PHGC and furloughed or transferred all employees.
- Based upon its condemnation powers, the City commenced construction of the stormwater detention project in the northeast corner of the PHGC land on January 4, 2019. At a public meeting in December 2018, city officials indicated the City would be finished with the stormwater detention work in the third quarter of 2019 and would return the property to Clayton to allow it to reconfigure the land as necessary to resume operations as an 18-hole golf course. The City administration has recently provided the following statement to City Council members:
The compensation payable by the City for the Easements it has acquired on the property will be paid to Westside once it completes the purchase. Westside may have arrangements with Arcis and/or the Trust (Clayton) with regard to those funds, but the City is not a party to any such agreement. The City is prepared to work with Westside to provide for the resolution of the condemnation action and the restoration of the golf course.
- On January 14, 2019, the City submitted a letter to Clayton stating that it was prepared to proceed in accordance with the proposed 2017 agreement. Clayton forwarded this letter to Arcis and, on February 15, 2019, Arcis notified Clayton that it desired to purchase the property in accordance with the City’s letter.
- On March 25, 2019, Arcis sued the City alleging, among other things, that since January 2, 2019 the City has illegally deprived Arcis of its leasehold rights to possession of the PHGC land without compensation.
- On June 19, 2019, Clayton and Westside Investment Partners (“Westside”) made a public announcement stating that they were “engaged in discussions regarding the Park Hill Golf Course” and that “as part of their due diligence, Clayton has filed the appropriate and lawful notice with the City of Denver for termination of the Agency Agreement pertaining to the property’s title.” Westside is a multi-state group of commercial real estate development companies.
- On July 11, 2019: (a) Clayton terminated the agency agreement; (b) the City re-conveyed title to the PHGC land to Clayton; (c) Clayton re-granted the conservation easement to the City on the same material terms as the 1997 conservation easement; and (d) Clayton sold the PHGC land to Bushwood, LLC (“Bushwood”), a Delaware limited liability company. Bushwood is a subsidiary or other affiliate of Westside. The purchase price reflected in the deed from Clayton to Bushwood is $24 million.
- Westside and/or Bushwood negotiated a termination of Arcis’ golf course lease on terms that are not now publicly available. Bushwood has not yet disclosed it plans for development of the PHGC land or for operations on the PHGC land upon completion of the City’s stormwater detention project.
- The City administration has provided the following recent statement to City Council members:
The Conservation Easement limits the use of the property to golf-related purposes and the current zoning of the property is OS/B (open space). In connection with the P2P Project, the City has funds available to provide for the restoration of the golf course. Therefore, the City is prepared to coordinate with Westside to accommodate the golf course restoration work as the City’s stormwater work on the site continues. The City is not otherwise aware of any specific future plans by Westside.
In order for any development to occur on the land, it will be necessary for Westside to modify or seek removal of the new Conservation Easement and obtain a rezoning of the property. Both of those steps would require support from the executive branch and two separate City Council actions. Depending upon the specific plans, additional approvals from the City, including additional City Council action, could be required.
- On July 18, 2019, the court dismissed Arcis’ 2018 lawsuit with prejudice. On July 29, 2019, the court granted a motion to substitute Westside Golf LLC for Arcis in Arcis’ 2019 lawsuit. In the 2019 lawsuit, the court has authorized payment from deposited City funds of the following amounts to the following parties: (a) $325,219.44 to Arcis, (b) $216,301.71 to Clayton, and (c) $470,978.90 to Westside Golf LLC. The amount of $337,500 remains in the court registry from the funds deposited by the City in the 2019 lawsuit.
- The Park Hill Neighborhood Plan identifies the Park Hill Golf Course land as a “major facility” of open space and states repeatedly that preserving open space is a primary goal of the Plan. For example, in the Plan’s Parks, Open Space, and Trails Section, the first stated goal is to “acquire, extend, improve, and maintain parks, public open space and parkways in the neighborhood to meet the needs of increasing population and to support recreational opportunities.” And, a goal of the Land Use and Zoning Section is to “preserve the existing parks and open space within the neighborhood.”
Prepared by Save Open Space Denver [website: sosdenver.net]