It will take months for a U.S. Bankruptcy Court in Eugene to sort out developer Cris Galpin’s financial future.
The broader Rogue Valley economy could feel the ripples for years to come, community leaders say.
Developers take risks, said Bill Thorndike, president of Medford Fabrication. Larger ones spread risks around the country to avoid regional setbacks. In Galpin’s case, the Rogue Valley’s five-year economic slump proved too powerful of a blow.
“Here’s an individual responsible for so much of the development in our valley during the last 20 years,” Thorndike said. “Now he’s the subject to the full-on effect of the Great Recession.”
Thorndike, a former member of the Portland branch board of the Federal Reserve Bank of San Francisco and the Port of Portland Commission, said commercial property developers have found themselves in a Twilight Zone during global economic pressures.
“If anything, it’s amazing how well he (Galpin) was able to manage the downturn until now,” Thorndike said. “In this case, he couldn’t come up with any other solutions for long-term financing for some of those major projects. It’s very, very said, but you can look around and see a lot of other developers who have lost considerable resources.”
Former state Rep. Leigh Johnson, now a consultant and president of the Jackson County Fair Board, said a bankruptcy involving millions of dollars and multiple financial institutions will touch everyone from food vendors to equipment makers.
“Anything of this magnitude is devastating,” Johnson said. “It’s not good for anyone to go through that, whether it involves one person or a number of people, in an area struggling with unemployment It sends an unhealthy message. It doesn’t send the right signals to investors in the valley, or out of the valley thinking about relocating here. It kind of makes them stop and think twice and ask ‘Is this area really economically stable and sound.’ “
Johnson said Jackson County, at least in the short term, will lose tax revenue and as property related to the bankruptcy loses value.
“Even when things are straightened out and the county gets paid back taxes, the value of assets will be diminished and when values fall, the county won’t be able to collect as many tax dollars.”
Financial planner Al Densmore, a Medford City Council member, said the case underscores a long-term economic shift.
“The rule of thumb in the financial planning business is that people should have a minimum of 20 percent equity in their property, just to protect against the downside,” Densmore said. “What we didn’t realize was that the downside was a lot further than 20 percent. I gather that is what’s at work here — even people who set aside substantial reserves are in difficulty.”
He said when a major developer such as Galpin can hit the wall, it has serious implications for an entire community.
“It impacts everything from the obvious — economic development — to charitable giving as well,” Densmore said. “We take it for granted, the people who do well in this community take care of the people less fortunate and are donating to all the good causes around; it does have sweeping negatives.”
Thorndike said Galpin has provided the region with a substantial legacy, whatever the outcome of the bankruptcy case.
“Eagle Point Golf Course was clearly a signature legacy project for him,” Thorndike said. “In my mind, the Albertsons (shopping) centers basically created a new shopping hub on the east side of Medford and revitalized the west side.”
The reality, he said, was that running commercial centers demands keeping space rented and residential development depends on new construction.
“He was able to access national and international capital to do the projects he was involved in,” Thorndike said. “He had a lot of developments on the books, but if you don’t have many people leasing, your cash flow is gone. In the case of Eagle Point, if you are putting in infrastructure for a lot of homes and the demand for homes evaporates, those dollars have already been poured into infrastructure.”
When lot prices plummet, the expected return falls short of expectations.
“Finally,” he said. “It all comes home to roost.”
Reach reporter Greg Stiles at 541-776-4463 or email email@example.com.
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