Trillium, the prominent Bellingham-based timber and development firm behind such projects as the Semiahmoo resort, has placed its struggling Denver arm in Chapter 11 protection.

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Trillium, the prominent Bellingham-based timber and development firm behind such projects as the Semiahmoo resort, has placed its struggling Denver arm in Chapter 11 protection.

The Denver entity, a limited liability company called WoDo, owes $20.1 million on a mortgage held by Western United Life Assurance, a subsidiary of failed Spokane-based financial conglomerate Metropolitan Mortgage.

The mortgage covers several parcels, totaling about 10.8 acres, in a rapidly developing area of Denver near Coors Field. Trillium bought the land in 1991 as part of a larger deal for former Burlington Northern Railroad properties.

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Western, Met Mortgage’s biggest operating subsidiary, has been run by a state-appointed receiver for almost a year. The insurer sued WoDo in Denver County District Court last fall to foreclose on the mortgage; a spokesman for the state Insurance Commissioner’s Office said the Denver properties were about to be put up for sale when the Chapter 11 petition was filed last month in U.S. Bankruptcy Court for Western Washington.

In addition to the Western mortgage, Trillium owes more than $1 million in back property taxes to the city and county of Denver, according to the bankruptcy filing.

Representatives of Trillium, which is owned by the Syre family, did not respond to calls seeking comment.

Trillium, a 31-year-old pillar of Bellingham’s business community, has become enmeshed in the collapse of Met Mortgage. Met and its sister company, Summit Securities, owe an estimated $583 million, mostly to thousands of small investors who bought their notes and preferred stock; the two companies declared bankruptcy a year ago this month.

According to the report of an independent examiner appointed by the Met Mortgage bankruptcy judge, Trillium’s inability to repay an initial 2001 loan on its Denver properties led it into a progressively deeper business relationship with Met Mortgage.

WoDo, the owner of record on most of Trillium’s Denver real estate, was known until recently as Trillium Commons.

In 1991, Trillium agreed to buy 230 parcels in seven states from Glacier Park, a subsidiary of BN spinoff Burlington Resources that was selling off its extensive real-estate holdings. Among the properties Trillium acquired was 185 acres of old rail yard and warehouses in Denver’s Central Platte Valley, wedged between the city’s downtown and Interstate 25.

Trillium has since sold off most of that original property, but retains several parcels behind Denver’s Union Station. According to the city’s master development plan, Trillium can build up to 3.6 million square feet of office and commercial space there.

While residential development in the area is proceeding rapidly, there has been little commercial construction — none of it on Trillium’s land.

Denver is just now coming out of a glut of office space caused by telecom-industry mergers and the general downturn in that industry, said Cindy Christensen, economic development director for the Downtown Denver Partnership. With so much existing space on the market, she said, there’s been little demand for new space.

“It’s not like [the bankruptcy] has thrown a wrench into any development plans, because there weren’t any development plans,” Christensen said. “We’re all just waiting for the commercial market to come around.”

In July 2001, according to the Met Mortgage examiner’s report, Trillium Commons took out a 4½-year, $20 million loan from Western United and an 18-month, $5 million loan from Met Mortgage. Even though interest-only payments didn’t start until February 2002, within a few months Trillium had fallen behind on the loan.

In September 2002, Met and Trillium structured a complex deal involving Met-owned properties in Everett and Texas and Trillium-owned timberlands in Washington, as well as a shell corporation called Jeff Properties controlled by a major Trillium creditor.

The deal — essentially a mortgage refinancing crossed with a land deal — brought the Trillium Commons loan current and allowed it to pay off its creditor, but its primary purpose was to make sure Met and its affiliated companies turned a fiscal 2002 profit — at least on paper.

When Trillium Commons fell behind on its payments again in early 2003, Western loaned it more money; Trillium then transferred some of that money to Jeff Properties, which also was behind on its payments. The purpose, the examiner concluded, was to enable Met Mortgage to show the Trillium and Jeff loans as current on its first-quarter report.

Records assembled by the examiner indicate that Trillium Commons fell behind on its Denver mortgage once again in January 2004. By then, however, Met Mortgage was near collapse and in no position to advance Trillium any more money.

Western was taken over by Insurance Commissioner Mike Kreidler’s office in March 2004, a month after Met’s bankruptcy. In September, it sued Trillium to foreclose on the Denver mortgage.

The property was originally set to be auctioned off Nov. 23 but was delayed several times, said Bill Ripple, a spokesman for Kreidler’s office. The most recent auction was scheduled for last month.

“Everything was all set — we were about to go to sale — but just before we did they filed for bankruptcy,” Ripple said.

Filing for bankruptcy automatically halts most other legal proceedings against a debtor, but Ripple said the receiver likely will ask the bankruptcy judge to allow the foreclosure to proceed and the Denver properties to be auctioned off.

Drew DeSilver: 206-464-3145