Two limited liability companies controlled by prominent Aspen commercial landlord Mark Hunt have been buying up fractional shares in the Prospector Condominiums over the past year.
To prevent a takeover of the property, the homeowners’ association — known as the Prospector Fractional Owners’ Association, or PFOA — has attempted to limit how much control Hunt’s entities can have, according to a lawsuit and response filed in Pitkin County District Court.
Between July 1, 2019 and July 31, 2020, Aspen Fractional Holdings, LLC and 301 East Hyman Avenue, LLC were the grantees of 15 fractional “estates” in the Prospector, according to sales recorded by the Pitkin County Clerk and Recorder’s Office.
The fractionals were sold in one-fifteenth shares, and the sale prices ranged from $10,000 to $52,000.
The Prospector — located at 301 E. Hyman Ave. — is considered prime downtown Aspen real estate by any measurement, as it sidles up against Wagner Park, is diagonally across the street from the historic Wheeler Opera House and is a short walk to the Silver Queen Gondola.
The Prospector also remains the final property on the 300-block of East Hyman Avenue not already controlled by Hunt and his partners, who have acquired 17 commercial properties for around $160 million since 2010, Randy Gold of Aspen Appraisal Group told the Aspen Board of Realtors during its annual market update at the St. Regis in February.
Amendments under scrutiny
Attorney Chris Bryan of Garfield & Hecht in Aspen said Monday he represents Hunt as a homeowner as well as the company with which he has a controlling stake, Aspen Fractional Holdings, LLC.
“Certain amendments to the [PFOA] declaration property are under scrutiny,” Bryan said.
Of concern are the semantics surrounding a right-of-first-refusal clause that changes the majority interest in the Prospector from two thirds to three quarters — or roughly 66% to 75% — passed by the PFOA on July 26, 2019. Bryan suggested whether the amendments were properly enacted and allowable under Colorado law will be argued in court.
In the original complaint, Scott Dorais, who lists a Basalt address, was under contract to sell his one-fifteenth interest, or “fractional estate,” in Unit 104 to Aspen Fractional Holdings, LLC when the PFOA apparently intervened.
“Injunctive relief is necessary because real property is unique. Aspen Fractional stands to lose real property in the event Dorais sells the property to [the] alleged [right of first refusal] buyer, and money damages would not adequately compensate Aspen Fractional for Dorais’ breach of the agreement,” according to attorneys for the plaintiff.
One key to the action could be the plaintiff’s contesting that approval had to be obtained from mortgagees in order to amend the declarations to create the right of first refusal and have a 75 % control. Should that argument prevail, then the PFOA could be taken over with a two-thirds majority of the vote. There would also be no right of first refusal.
An April 24 response to Aspen Fractional Holdings, LLC versus The Prospector Fractional Owners’ Association, filed in Pitkin County District Court, offers a window into some of the owners’ concerns about ramifications of a majority rule by one entity.
“Restricting owners from holding more than 10 fractional shares is rationally based upon the interest of protecting against one owner having a large enough voting bloc that could impair the PFOA Board’s decision-making process,” it reads.
“A restrictive covenant that restrains alienation is permissible where it is reasonable; and whether the restriction against owning more than 10 fractional estates is reasonable presents a disputed issue of material fact,” continues the statement by attorneys Bradley N. Shefrin and Lauren B. Shannon of Nixon Shefrin Hensen Ogburn, P.C. on behalf of the PFOA.
Shefrin and Shannon declined to discuss their suit in a phone call on Tuesday, citing client confidentiality.
PFOA became a named defendant in two suits that were initiated by the fractional interest owner entities back in January before they were consolidated a month later.
The fractional owners’ association has created a trio of defenses, including the no-more-than 10-unit ownership rule, the 75% voter requirement and the right of first refusal.
The plaintiff points out that an earlier amendment to the condominium contracts adopted in 2005 lessened the voting majority requirement to adopt further amendments from three quarters to two thirds — but retained the three-quarter provision for approval by lenders. A subsequent PFOA amendment, however, restores three quarters as the voting threshold for changing the declarations.
King of the block
The landscape on the 300-block of East Hyman Avenue for Hunt-controlled holdings includes the following:
The Popcorn Wagon property and the Kirby Ice House pop-up restaurant on the corner of East Hyman Avenue and Mill Street.
The majority of the building that houses Su Casa and Eric’s Bar, which is sandwiched between the Popcorn Wagon and the Prospector. On Jan. 13, 2020, Hunt closed on the spaces for $10.6 million in a transaction involving the Casper family.
Across the street, Hunt bought the building next to the Wheeler Opera House at 312 E. Hyman Ave. for $12.5 million in September 2013. The Aspen Times offices are in the building.
Next door, at 300 E. Hyman — site of the Crystal Palace dinner theater — Hunt’s group is building a 16-room, two-story boutique hotel. Aspen City Council allowed the developer to combine two properties, at 300 and 312 E. Hyman Ave., for this purpose.
Hunt and a representative from 301 E. Hyman Ave., LLC did not respond to July requests for an interview made about his intentions for the Prospector, which, according to its website, “became the first Fractional Ownership opportunity to be approved for sale in the city of Aspen” in July 1984.
Madeleine Osberger, email@example.com, is interim editor of the Aspen Daily News.