Swallow Hill expansion at Lowry on hold due to lease not being approved. No explanation why

Update, 3 p.m. 4/5/13: We've received a statement from Swallow Hill CEO Tom Scharf and also spoke with Hilarie Portell, Public Relations & Marketing Director for Lowry Redevelopment Authority, who both gave us more insight into the situation regarding Swallow Hill's planned expansion into Lowry. Between the two of them, we now have a better idea as to why the pending lease agreement wasn't approved. It all seems to stem from a deed restriction attached to the land, which Portell's group has jurisdiction over.

See also:
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"The issue as I understand it," explains Swallow Hill CEO Tom Scharf via email, "is that the Lowry Redevelopment Authority (LRA) has restrictions on educational uses (a fact that I just learned today) for the property in question and that Weingarten proceeded to engage in lease with Swallow Hill Music, hoping to get a waiver on that restriction. As I understand it, the LRA was willing to consider the waiver if Weingarten provided indemnification against any issues, including lawsuits, that resulted from our tenancy. Weingarten decided that the potential exposure was not in their best interest and terminated the lease."

Speaking on behalf of her group, which began developing the Lowry community in the early '90s when the military base closed, Portell informed us that the Lowry Redevelopment Authority originally sold the Lowry Town Center property to Miller Weingarten Realty in 1998. As a provision of that sale, she explained, the LRA, a non-profit quasi government entity charged with overseeing planning, zoning and infrastructure for the community, indeed attached a deed restriction to property. That deed restriction, from the sounds of it, is at least partially responsible for the lease not being approved.

"We've actually had very little to do with this lease negotiation. We were thrilled to learn that Swallow Hill was considering opening a satellite campus at Lowry. We'd love to have them as a cultural amenity and member of the community. There is a deed restriction on that land, though, for the Town Center. A lot of uses were ruled out in the early days to make sure it would remain a small scale retail town center -- undesirable things like gas stations and, I don't know, things that the community didn't want to have there. But one of those uses was educational uses.

"So Weingarten Realty came to us when they were talking to Swallow Hill and asked if we would lift the deed restriction, and we said, 'Yeah, we would consider that,' because they would be great tenant," Portell continues. "But we had questions about their parking needs, any noise impact due to their operations - we don't really know what they're planning there -- but we would want to consider those factors before we did that. So we said, 'Why don't you talk to Albertson's first, because they're the anchor of the Town Center, and we discuss it more later.'

"We also asked an indemnification in the event that we lifted the deed restriction and somehow Swallow Hill disrupted the activities of the other tenants, and they got angry and came and blamed us, that we would have some indemnification there. You've got to proceed carefully when you're thinking of lifting a deed restriction, even for tenant like Swallow Hill, which is a wonderful organization."

So Weingarten went away and started negotiating with Albertson's and that's the last we heard from them, and that was late last year. So it had really taken us by surprise that the deal had fallen through. I got the eblast from Swallow Hill last night, and immediately got on the phone to figure out what happened."

While Weingarten hasn't really been forthcoming about the whole situation, according to Portell, the Houston-based realty firm evidently considered the request for indemnity on the part of the Lowry Redevelopment Authority to be unreasonable. Also at issue, apparently, is potential noise issues. The space Swallow Hill is looking to lease is on the second floor of the Town Center adjacent to other offices, and so there's some concern about noise issues, which the folks at Swallow Hill have been proactive about presenting a plan to mitigate those concerns.

Scharf, who stresses that it's not his intent to turn this into a big public issue, but feels the need to keep stakeholders abreast of the developments, is very disappointed by the whole situation. "We are a non-profit who is surviving well in the market," he notes, "but these losses in resources, time and lost revenue have been significant for us.

"I think the most disappointing part of the process for us," he adds, "is that our forward momentum and investments (including the lease deposit and 15K+ dollars in architect and engineer fees ) were tied up in excess of six months while the challenges between all parties were being (or not being) debated. And really, the worst thing is that there are a lot of families in that geographical area that were really looking forward to our unique brand of music education."

For its part, the LRA is very much in favor of Swallow Hill moving into the Lowry Town Center, and is completely willing to reengage in talks. Portell says she's reached out to both representatives from Swallow Hill and to Weingarten's leasing director offering to help seek out a resolution. "I just want to make it clear," says Portell, "that Lowry, as a community, would love to have Swallow Hill there. They're a perfect fit for the area, and they could serve a broad constituency in east Denver, and it's much, much needed."


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Swallow Hill Music Hall

71 E. Yale Ave., Denver, CO

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