Litigation Update - LEASE PURCHASE AGREEMENT

INFORMATION TO GRANBY RANCH PROPERTY OWNERS
AND RESIDENTS REGARDING CURRENT LITIGATION

September 30, 2024

What is the Lawsuit About?

Granby Ranch Metropolitan District (“District”) filed the lawsuit on February 23, 2021 against Headwaters Metropolitan District (“Headwaters”) and GP Granby Holdings, LLC (“GPGH”) in order to enforce a lease purchase agreement and to protect the rights of the public and the Granby Ranch community in the amenities.  As many of you will recall, our community and the former developer (Granby Realty Holdings, or “GRH”) wanted to be sure that the amenities including ski facilities, golf course, and certain other recreational amenities would remain available for the benefit of the Granby Ranch property owners and would not be converted to some other use (such as sold for condominiums or additional lots) in future years.

In 2005, GRH, Headwaters, and GRMD entered into a series of agreements and joint resolutions that were intended to protect these amenities for continued use and enjoyment by our community. These included:

1)      A joint resolution between GRMD and Headwaters that allowed Headwaters to collect a one-time $10,000 per lot amenity fee on the initial purchase of every GRMD lot by an end user (i.e., homeowner) or construction of a home by a builder.

2)      An Amenity Fee Agreement between Headwaters and GRH that provided for the payment of the $10,000 fee on each lot. This fee was mandatory on all lots, and a lien was recorded to insure that these fees would be paid at closing.

3)      A Lease Purchase Agreement (“LPA”) between Headwaters and the resort property owner, GRH. As amended in 2012, the LPA provided that whatever amenity fees were collected each year would be paid as “rent” and applied toward the purchase price of the amenities. So long as the agreement remained in place, the amenities would be transferred to public ownership by Headwaters at the EARLIEST of the following events: a) when all amenity fees that could be collected were paid; b) when the amenity fees paid exceeded a formula price for the amenities based on their value adjusted for improvements and inflation, or c) on December 31, 2062.  This LPA was recorded with the Grand County property records to ensure that it would enforceable against subsequent purchasers.

Besides contributing toward the purchase of the amenities, Granby Ranch owners of the properties subject to the amenity fees were also entitled to preferred or discounted access to the ski facilities and golf course.

In 2020, the lender holding the Deed of Trust on the property foreclosed on GRH. At the end of the foreclosure process in August 2021, GPGH (an entity related to the previous lender) obtained the deed to the GRH property, including the amenities. On September 1, 2020, GPGH sent out a letter advising Headwaters and the community that it contended that the LPA was no longer in place due to the foreclosure, and it now had sole possession of the amenities. GPGH also replaced the operator of the amenities with a company that was an affiliate of GPGH.

GRMD contacted an attorney to investigate the validity of the LPA after the foreclosure, and when the investigation concluded that GRMD had a valid legal claim, the lawsuit was initiated by GRMD.

Did GRMD initially bring a lawsuit against the current Developer GR Terra?

No.  GR Terra purchased the property from GPGH in May 2021, after they completed their due diligence and after the lawsuit was filed in February 2021.  Shortly after GR Terra’s purchase, they requested GRMD’s approval to be added as a defendant in the litigation.  GR Terra introduced themselves to the litigation by acquiring the property and requesting of GRMD to be added as a defendant.

What is the current status of this litigation?

On July 30, 2023, the District Court entered orders that, stated generally, dismissed the District’s claims without prejudice, concluded that the 2012 LPA was terminated, concluded that any restrictive covenants contained in the 2012 LPA were terminated, and entered a decree quieting title in favor of GR Terra.

The District filed an October 25, 2023, Motion for Entry of Final Judgment asserting that all remaining counterclaims were moot. Defendants contested this Motion. Subsequently, the parties entered into a stipulation that was approved by the District Court on December 10, 2023, that dismissed certain counterclaims asserted against the District. Following entry of this Court-approved stipulation, at most two of HMD’s counterclaims (including a breach of contract claim asserting damages (including for attorney’s fees and costs)) and one of GR Terra’s counterclaims, remained pending before the District Court.

The District filed an appeal of the District Court’s July 30, 2023, orders on September 15, 2023, with the Colorado Court of Appeals. This appeal was ultimately dismissed without prejudice—meaning that it may be refiled in the future—because it was not clear that all claims pending before the District Court had been resolved.

Assessing and predicting the outcome of this matter involves substantial uncertainties. It remains possible that despite the District Board’s current belief, material differences in actual outcomes or changes in the Board’s evaluation or predictions could arise that could have a material adverse effect on the District’s financial condition, results of operations, or cash flows.

If I Have More Questions, Who Should I Contact?

The GRMD Board is your elected local government, and we always welcome public comments at Board meetings or in writing to our manager, Wolfersberger, LLC. While individual directors cannot speak for the entire Board (i.e., the Board acts as a whole) you should feel free to send questions or comments to our manager, any Board member, or attend a Board meeting. Our meetings are public meetings available to all to attend by remote teleconference.

We believe, as a Board, that we needed to take this action to protect your property values as well as the $6.1 million that had been paid to date to acquire the amenities. If the ski facilities and golf course are privatized (such as via a “country club” arrangement for example) so that residents do not have access, or are converted to additional homes or condominiums, it could have a devastating effect on your property values.