A planned entertainment district in Glendale has devolved into a lawsuit.
The local developer behind a 10-acre Alamo Drafthouse-anchored project says its contract to buy a portion of the development site from the enclave is canceled because of Glendale’s actions.
Central Street Capital, led by Rob Salazar, filed suit against Glendale last Thursday, saying the city surrounded by Denver breached the contract as it prepared to transfer 5 acres that would become part of the planned 4 Mile District.
Central Street indicated it has suffered damages in excess of $20 million.
The project, whose name refers to the nearby Four Mile Historic Park, is slated to be built on 10 acres along Virginia Avenue, south of a Target and north of the Cherry Creek bike path. Plans call for various retail and restaurant concepts and potentially a hotel. But an Alamo Drafthouse that would be owned by Central Street is the only tenant that’s been announced.
Central Street began infrastructure work for the project, which includes underground utilities and a parking garage, last summer. That work, financed by more than $50 million in bonds through a metro district, continues despite the litigation.
“We do not comment on pending litigation,” Central Street President Isiah Salazar, who is Rob’s son, said in an email. “However, notwithstanding this legal action, construction on the site related to public improvements such as underground utilities and parking garage will continue.”
But the lawsuit threatens the private development slated to follow.
Central Street owns only a small portion of the development site. The remainder is owned by Glendale.
In 2021, the parties struck a deal. Glendale agreed to sell the land to Central Street in two phases after “certain construction and investment milestones” were met, according to last week’s lawsuit. Central Street was to pay just $1 each time.
Central Street said it has met the milestones that allow it to purchase Phase 1, which consists of 5 of Glendale’s 9 acres. Glendale “initially refused to acknowledge” that, according to the firm, but later agreed to proceed with the sale.
The parties agreed to close on March 5, according to a letter Rob Salazar sent to Glendale last week. But shortly before closing, Glendale recorded a “use covenant” against the Phase 1 property.
That document places restrictions on the property. Among other things, it mandates that Central Street build at least 90,000 square feet for sales-tax-generating users.
Central Street had already agreed to do that — but across the entire 10-acre project, not just the Phase 1 property.
In its lawsuit, the firm said it’s impossible to develop the Phase 1 property to comply with the use covenant under the development plans Glendale already approved. And it said the document also impacted its ability to get financing.
“Prior to entering into a loan agreement for construction on the Phase 1 Property, Developer will be required to make written representations to lenders that it is in compliance with all encumbrances affecting the Phase 1 Property,” the lawsuit reads.
Central Street said it offered alternate versions of the use covenant that “would not result in an encumbrance rendering title unmarketable” but was shot down. The document was ultimately signed only by Glendale Mayor Mike Dunafon and not by Central Street, despite including wording stating the developer agrees to its contents.
The land transfer never took place. Salazar wrote in his March 13 letter, sent the same day the lawsuit was filed, that Central Street “elects to treat the Contract as cancelled due to Seller’s default.”
He said the company’s damages include the $20 million fair market value of the Phase 1 property, $2.85 million it expected to be reimbursed for buying the one piece of land it does own and $446,000 it expected to be reimbursed in connection with building a parking structure.
Attorneys Brandee Caswell and Hunter Ross of Davis Graham & Stubbs are representing Central Street.
In a statement issue to BusinessDen by City Manager Chuck Line on Tuesday, Glendale said it would “vigorously defend the lawsuit.”
“The developer’s lawsuit is a performative, frivolous attempt to leverage Glendale for a reason only known to the developer regarding a technical aspect of a land use restriction required by a 2021 Development Agreement between the parties,” Glendale said.
Glendale, with a population of 4,500, fashions itself as a small-government alternative to bureaucratic Denver. Dunafon, whose wife owns Shotgun Willie’s strip club, called Glendale “the Vatican of liberty and Luxembourg of freedom” at last summer’s groundbreaking ceremony for the 4 Mile District.
But Central Street’s lawsuit questions that. The firm said Glendale officials claimed it was a “business-friendly city” and “frowned upon governmental red tape,” only to subject Central Street “to four years of painstaking and costly planning and approval processes.”
Glendale has been attempting to establish an entertainment hot spot for years. Developers and project names have come and gone.
Before Central Street, Dallas-based Lincoln Property Co. had signed on to build a project it called Glendale 180. Glendale officials told Central Street that ended in 2020 because of construction delays related to the pandemic, according to the lawsuit.
Prior to Lincoln Property, Houston-based Wulfe & Co. was going to develop the project. That firm backed out in 2016, telling The Denver Post it and Glendale “couldn’t come to business terms on a development agreement.”
Central Street’s 10-acre project is much smaller than what the city once envisioned. More than a decade ago, the hypothetical development then known as Glendale Riverwalk was going to be 42 acres. But successful lawsuits from owners of property that would have been swallowed up led it to be scaled down.
Editor’s note: This story has been updated with a statement from the City of Glendale.
This story was originally published on BusinessDen.
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