Gunnison Rising owners file for bankruptcy

Gunnison Rising’s investors and developers have faced no shortage of obstacles in recent years: delayed utility installation, unfavorable interest rates and, most recently, a series of lawsuits from contractors alleging unpaid invoices. But the project might be now facing its most considerable hurdle yet. 

At the end of August, Gunnison Valley Properties (GVP), the company behind the 630-acre Gunnison Rising development, filed for Chapter 11 bankruptcy in the Colorado District of United States Bankruptcy Court. Chapter 11, referred to as a “reorganization” bankruptcy, allows investors and business owners to keep their company whole and continue fundraising while the court decides how to sort out finances and pay outstanding creditors, or those who have put money into the project. 

The bankruptcy process ultimately allows GVP to “get back to building Gunnison Rising,” the GVP team stated in a Sept. 17 press release. GVP still intends to issue bonds through seven previously-approved metro districts covering Gunnison Rising. Metro districts allow private developers to place a tax on real estate for future residents. Revenues are then used to pay investors a stated rate of return.

“Because of mounting expenses and related litigation with certain contractors, GVP in consultation with its legal counsel and other advisors, has determined that it is in the best interest of all stakeholders to voluntarily seek reorganization protection under Chapter 11,” the press release reads. Project manager Jeff Prosapio declined to comment further.

GVP also owns approximately 94% of Tomichi Materials LLC, the material and concrete provider on Hwy. 50 east of town. The company will continue serving the valley through bankruptcy, the press release stated. 

The filing came just weeks before the company was set to appear in trial for a lawsuit with one of its contractors, Crested Butte-based Dietrich Dirtworks. As a part of that lawsuit, Dietrich filed a mechanic’s lien on the property, which GVP contests. If upheld, the lien could force GVP to sell pieces of its property to pay its multi-million dollar bill to Dietrich. Filing for bankruptcy pauses all ongoing litigation, but Dietrich’s lawyers are pushing to allow the case to proceed in Gunnison District Court. 

And in bankruptcy filings, GVP cited over $42 million in financial liabilities. Nearly three quarters of that is collateralized, or secured by, Gunnison Rising land, other land owned by GVP, and GVP’s ownership interest in Tomichi Materials. 

Without filing Chapter 11, the company would have been forced to continue in its lawsuit with Dietrich. And, with debt racking up, no bonds issued and dwindling cash in the bank, land could be sold to pay GVP’s creditors — depriving all of the chance to develop the parcels and sell them for a significant profit. 

A long road

GVP is owned by commercial real estate developer Byron Chrisman and Gunnison attorney Dick Bratton. Bratton has the lion’s share of ownership in the company, just over 39%. Chrisman claims 12% (another 17% is owned by the Carlene Chrisman Trust) and the rest is divided among estates and trusts based in Highlands Ranch, Longmont, Boulder and Moab, according to bankruptcy filings. 

Since its inception in the early 2010s, Gunnison Rising has been framed as an expansive development for everyone: converting open land adjacent to town into a walkable development with affordable housing units, commercial stores, trail connections and even a “glamping” lot.

Marketing on the Gunnison Rising website (which has not posted news or blog updates since May of 2023) conjures the many prospects that draw people to the Gunnison Valley: a “remote worker’s haven,” with quick access to a university, airport and ski resort. GVP still intends to put in 1,700 residential units and offer almost 1 million square feet of commercial space, the recent press release stated. As of press time, the website offered several near-3-acre lots along the Hwy. 50 frontage road, listed for around $1 million. 

In October 2021, GVP sold off its first parcel: 7.5 acres right off Hwy. 50 to Alabama-based Saad Development Corporation for $2.5 million. Saad developed the 38,000-square-foot building into a FedEx distribution center, to turn around and sell it in 2022 for over $20 million to national private equity real estate firm Cove Capital Investments. Cove now leases to FedEx, and markets the business as an “all cash, debt free” investment with a minimum buy-in of $50,000. Earlier that year, the parcel next door, containing the new Bureau of Land Management Gunnison Field Office, sold to investment property owner Simco Ventures LLC, which now leases it to the federal agency. 

Despite the two sales, the project has faced considerable barriers in trying to break ground, lay utilities (see story on A11 for more on the City of Gunnison’s involvement) and finance the project. GVP has been unable to sell the bonds meant to finance the project, with developers citing fluctuating interest rates. The company’s thinning cash reserves are detailed in its bankruptcy filings. 

In 2023, GVP reported just over $802,000 in gross revenue. But from the start of 2024 to filing for bankruptcy in late August, revenue fell to $33,000. At the time of filing, the company reported it had just $70,000 in cash. 

However, it claims to own over $87 million in real property with total liabilities of just over $42 million, indicating that GVP might be well-suited to pay off debt. GVP has 43 creditors listed so far, including contractors brought on for the project, lawyers, funds and trusts that have given money over the years. And, $32 million of that liability is owed to eight “secured” creditors — those whose claims are backed by GVP’s land and ownership interest in Tomichi Materials — solidifying their right to have acreage sold to recover their initial investment.

Chapter 11

Chapter 11 bankruptcy allows GVP to continue raising money to pay off debts, unlike Chapter 7, or a “liquidation” bankruptcy where the company is forced to sell its assets and distribute proceeds to pay its creditors. Companies that file for Chapter 11 are usually on “untenable” debt collection timelines with people who have lent them money, said Nadav Orian Peer. Peer is an associate professor at the University of Colorado Law School and former economist at the Federal Reserve Bank of Chicago. He studies financial institutions, bankruptcy and community development finance. 

“If liquidation is a statement that something is worth, in some sense, more dead than alive, reorganization is a statement that something is worth more alive than dead,” Peer said. 

Bankruptcy affords the filer a number of benefits, primarily that all requirements to pay debt are put on hold. And, ongoing lawsuits are paused until the bankruptcy is resolved in court. GVP can also continue to raise money while in bankruptcy, using “debtor in possession” finance, the same used by General Motors and Chrysler during the Great Recession. This allows the company to issue debt and stay afloat while the case works through court. 

GVP will be required to submit a plan of reorganization, which must be approved by both the court and its creditors. In doing so, it avoids creditors choosing to foreclose on their interest in the land and sell portions of Gunnison Rising for a fraction of what it will be worth once developed, preserving the chance at converting raw land into big money. The same goes for all GVP’s creditors: the value of land in a forced sale will pale in comparison to its eventual price on the open market.

“It's like a breath of oxygen,” Peer said. “You get a pause on property being taken away.” 

For example, several 3-acre lots in phase 1 of the project, or the “government campus,” are currently on the market for around $1 million, or around $333,000 per acre. Gunnison Valley-based Bluebird Real Estate is brokering all Gunnison Rising sales. GVP’s sale of the 7.5 acre lot to Saad in 2021 reflected the same per-acre price. 

But were GVP forced to start selling land to pay debt, the profits would dry up. One of GVP’s big creditors, Biomedical Ventures LLC, has put in $10 millon and is named as a beneficiary on two deeds of trust, according to bankruptcy filings. Hypothetically, if Biomedical foreclosed its interest in the land — 240 acres secured by the deeds — the parcels would be auctioned off with minimal marketing to the highest bidder. 

Filing for bankruptcy also allows companies to avoid looming court deadlines. The bankruptcy was filed just three weeks before GVP’s trial with Dietrich was set to start, and before District Judge Kelly Starritt could rule on “important” motions, said Dietrich’s lawyer Bruce Rohde. 

On July 10, Rohde asked the court to validate the mechanics lien and rule that Dietrich is owed $3.8 million for excavation, sewer, water and utility work. The dispute with GVP is over the final amount owed, interest accruing on unpaid invoices and the timeline of these payments. 

“The bankruptcy filing is a transparent effort on their part, which is to avoid the inevitable, the sale of their project to another developer with the funds to complete it,” Rohde said. 

GVP asserts that the amount claimed in Dietrich’s $4.7 million lien is not only contested but “excessive at its face,” its lawyers stated in a response filed at the end of July. It also claims the documents might not have been properly recorded with the Gunnison County Clerk and Recorder’s office, proper notice wasn’t provided and it fails to acknowledge its priority among others claims on the property. 

Dietrich, now a creditor in the bankruptcy case, filed a motion asking bankruptcy court to lift the “stay,” or the pause on debts owed, to allow Starritt to rule on the amount owed and the lien. Without this exemption, Dietrich has to “start over” in bankruptcy court and join a long list of other secured creditors who might also be owed millions. 

A virtual hearing for Dietrich’s  motion to amend the stay has been set for Oct. 8 at 1 p.m. Creditors who believe they have a financial claim against GVP have until Oct. 28 to file in bankruptcy court. 

(Abby Harrison can be contacted at 970.641.1414 or abby@gunnisontimes.com.)