Dillard’s Eminent Domain Battle Heating Up in Colorado

An eminent domain battle has been brewing in Longmont, Colorado regarding a proposed $80 million redevelopment plan for Twin Peaks Mall, an indoor shopping mall.  The players include the Longmont Urban Renewal Authority (LURA), mall owner NewMark Merrill Mountain States, and Dillard’s, Inc. an upscale national retailer, mall anchor and landowner.  Negotiations over the specifics of the redevelopment project began last year between NewMark Merrill and Dillard’s but fizzled in April when the two sides could not find common ground.

As explained by TimesCall.com here:

NewMark Merrill had hoped to break ground on the new mall this fall. But as plans were developed, Dillard’s became a sticking point; the retailer owns its own building and has a covenant with the mall giving it veto power on any reconstruction. Talks between NewMark and Dillard’s hit a wall by April 1; follow-up talks between the city and Dillard’s also proved fruitless and led the city to go to court, asking for a condemnation.

As such, LURA has offered to acquire the building and land beneath it from Dillard’s for $3.6 million. Dillard’s, however, believes that it’s property interest is more valuable than LURA’s offer. The building was recently assessed by the Boulder County property appraiser for $2.9 million (it was $3.8 million in June 2010).  However, assessed value and “just compensation” in eminent domain are seldom the same value.  In this case, the County property appraiser valued the real estate for a specific purpose – taxes – and may not have taken into consideration valuable property assets such as trade fixtures, personal property, inventory, relocation costs or lost business goodwill which may be included in just compensation under a jurisdiction’s eminent domain laws.  [A reminder to our readers: Eminent domain laws and procedures vary from state to state, to understand what laws apply and what constitute’s “just compensation” in your state, please consult with an experienced eminent domain attorney.]

Again, TimeCall.com sums it up well here:

[T]he situation is a row of dominoes. LURA has offered $27.5 million to assist the project. But the assistance depends on mall owner NewMark Merrill Mountain States getting a construction loan. That loan, in turn, depends on NewMark holding the Dillard’s title, LURA attorney Robert Duncan said.

Dillard’s attorneys have moved to dismiss the eminent domain proceedings arguing that the property only can be taken for urban renewal purposes based on “valid blight determination and not for economic development purposes.”  Further, Dillard’s contends that the condemnation of it’s Longmont store is not to “eradicate blight, but rather to obtain certain redevelopment control rights (Dillard’s) have over the redevelopment of the Twin Peaks Mall property.” Additionally, Dillard’s alleges that LURA “has not negotiated in good faith with (Dillard’s) for the acquisition of the property.”

Under Colorado law, LURA has filed a Verified Motion for Vesting requesting that the court permit it to take immediate title and possession of the store prior to a determination and full payment of just compensation.  Dillard’s attorneys, including OCA Colorado Member, Leslie Fields, oppose immediate vesting and possession arguing that the vesting statute is unconstitutional and that Dillard’s has a right to a jury trial before surrendering its ownership to the city.

At a hearing yesterday on the motion for vesting, Ms. Fields said, “Allowing these rights to be thrown away, we believe, is contrary to the Colorado Constitution and to Colorado jurisprudence.”

After hearing testimony and argument all day yesterday, Judge D.D. Mallard chose not to rule on LURA’s request for vesting title and immediate possession.  Rather, both sides have until next Friday to submit final written arguments, with a ruling expected at the end of August.

If the court grants vesting and immediate possession to LURA, NewMark can begin work redeveloping the mall while litigation continues to determine the just compensation due to Dillard’s. If LURA’s motion is not granted, the redevelopment will be on hold until the conclusion of litigation.  If the court grants Dillard’s motion to dismiss, Dillard’s will retain its property and its rights under the binding agreements governing the shopping center.

Check back for more news, we’ll definitely be following this one.

[Disclosure: As mentioned above, one of Dillard’s attorneys is Leslie Fields the Colorado attorney-member of Owners’ Counsel.]

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