Colorado Crossing: "It's a mess"

With the local and national economies foundering, the local construction industry needed a developer with money problems like it needed bad weather during a road project.

But that’s what happened at Colorado Crossing on Colorado Springs’ far north side.

Colorado Crossing was envisioned by local developer Jannie Richardson as one of the region’s more ambitious mixed-use projects — 153 acres, 1.6 million square feet of office and retail space, 1,600 residences, a 1,050-space parking garage and a 14-screen Cinemark movie theater complex, among other features.

Instead, for 40 or so companies hired to install plumbing fixtures and electric lines, construct the garage, theater and other buildings, provide engineering services and supply steel, concrete and building materials, Colorado Crossing has become a legal and financial fiasco.

About 1½ years after construction began, the project’s first phase remains unfinished, and Richardson owes contractors and subcontractors $19 million for work they’ve done, according to El Paso County Clerk & Recorder’s Office records and figures compiled by a local law firm. Legal claims filed by the companies seeking payment — known as mechanic’s liens — range from several thousand dollars to more than $2.5 million; the total dollar value of the liens is the highest some contractors and subcontractors can recall for a Springs project.

Richardson and her attorney declined to comment.

One owner of a small firm says he tapped his personal savings to stay afloat after not getting paid. Other companies laid off workers. A steel company delayed equipment purchases for a new fabricating plant.

Already, many of the companies say, they were hurting because the poor economy has slowed construction of homes, shopping centers and government capital improvement projects. And beyond not getting paid, combined legal fees for the contractors and subcontractors are likely to run into the hundreds of thousands of dollars, said Karl Berg, an attorney for three of the subcontractors.

“It’s a mess,” Berg said.

Colorado Crossing’s first phase, southeast of Colorado Highway 83 and InterQuest Parkway, includes the Cinemark complex and parking garage. Some contractors and subcontractors worked only on the theater and garage, others worked on three adjacent office and retail buildings. They say Richardson started out financing Colorado Crossing with her money, but told them she was unable to borrow money to finish the project because of the nation’s credit crunch.

Some of the businesses doubt they’ll be paid the full amounts owed to them. Others speculate they might wind up owning Colorado Crossing as part of a foreclosure action.

In the meantime, contractors and subcontractors are waiting.

Interstate Mechanical Inc., a 13-year-old company that owner John Pniak runs out of his Elbert home northeast of Colorado Springs, installed plumbing fixtures in the Cinemark complex. When he didn’t get paid $70,000 for his work, Pniak said, he took a substantial amount of money out of his savings account to keep his business going and to pay vendors and suppliers.

“It almost bankrupted us,” Pniak said of not getting paid. “We’re a small company ... That’s not $70,000 worth of profit, that’s $70,000 worth of work that we performed there.”

General Ceilings and Partitions of Colorado Springs, which is owed nearly $500,000, and Concrete Management Corp. of suburban Denver, which is owed almost $2.8 million, both said last year they had laid off employees when they didn’t get paid.

Omaha, Neb.-based Drake-Williams Steel Inc., which traces its roots to 1882 and has about 200 employees, supplied fabricated steel to the office and retail buildings and is owed $2.1 million, one of the largest liens of any of the companies involved.

Drake-Williams worked in the Denver area for about 30 years before deciding a few years ago to set up a Colorado fabricating plant, said co-owner John Williams In August, Drake-Williams bought a building in Aurora.
Because it hasn’t been paid, Drake-Williams has delayed the purchase of a few pieces of equipment at its new plant for at least a year, Williams said. Also, Drake-Williams’ 200 employees are paid bonuses tied to company projects but won’t receive about $400 each for work at Colorado Crossing, he said.

“We would be out of business if we told the steel mills, ‘hey we can’t pay you for the steel’,”  Williams said.

Other companies say they’re big enough to absorb the financial hit they’ve taken at Colorado Crossing, yet not without some pain.

G.E. Johnson Construction Co. of Colorado Springs was the general contractor on the office and retail buildings and is owed about $2.1 million. G.E. Johnson President Jim Johnson said he worries that companies such as his could have trouble borrowing money; when lenders see large, uncollected bills on your books, they might decide you’re a credit risk and charge you higher interest rates or lend you less money, he said.

Cash flow also becomes a big problem. Springs-based Stresscon, which manufactures precast and prestressed architectural and structural concrete and built Colorado Crossing’s parking garage, paid its vendors and suppliers even though it didn’t receive almost $1.6 million from Richardson.

 “Obviously, we’re out the money,” said Mike Norwood, Stresscon’s executive vice president. “We’d feel better having it in our bank account than hers.”

Olson Plumbing & Heating of Colorado Springs is owed $1.1 million.

“If there were people out there that weren’t as well-financed as we were, it would put them out of business,”  said Mike Trapp, who heads Olson.

Some of the companies say Richardson has offered to settle. Several weeks ago, Richardson offered 60 cents on the dollar to Drake-Williams Steel, Williams said. She also offered to swap land in exchange for what she owed. No deal, Williams said he told her.

Given the amount of liens on the property, Richardson probably won’t be able to obtain conventional financing to finish the project, said Berg, the attorney. Likewise, he said, Richardson told him recently she had no tenants lined up for the office and retail buildings, which also would make it difficult to borrow money. The Cinemark theater complex needs to be completed to help generate revenue and increase the project’s property value, which is probably less than the $19 million in liens, Berg said. Cinemark officials didn’t return a call, but have said they’d be ready to open when Richardson completed construction.

Liens are common in the construction industry; they’re typically filed when a dispute arises over the quality or timeliness of work.  Usually, the liens are settled, payments are made and the actions are withdrawn.

Because of the messiness of Colorado Crossing, some companies might sell their lien rights and take less money than they’re owed, Berg said. Others might hang on to get the full amount.

Contractors and subcontractors have asked a 4th Judicial District Court judge to allow them to foreclose on their liens, which would result in them taking ownership of Colorado Crossing to satisfy their unpaid bills. A trial is scheduled to begin in April.

Berg said he doubts Richardson will come up with money to satisfy all the liens. As a result, he said, contractors and subcontractors need to decide how best to settle their claims.

“This is not your typical lien case where we all get paid off,” Berg said. “I said from the very beginning that the lien claimants will end up owning the property. We need to start planning for it. Otherwise, it will be a free-for-all.”
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BIG MONEY

About 40 construction industry firms have filed legal claims against Colorado Crossing, seeking payment for $19 million in work they’ve done on the mixed-use project, but for which they haven’t been paid. The top 10 claims:

• Concrete Management Corp., Littleton, $2.77 million.
• Drake-Williams Steel Inc., Omaha, Neb., $2.14 million.
• G.E. Johnson Construction Co., Colorado Springs, $2.11 million.
• Stresscon Corp., Colorado Springs, $1.59 million.
• Olson Plumbing & Heating Co., Colorado Springs, $1.12 million.
• Rio Grande Co., Denver, $980,671 (includes liens of three companies combined into one filing).
• Bible Electric Inc., Colorado Springs, $690,121.
• E Light Electric Services Inc., Englewood, $498,996.
• Glover United Masonry Inc., Arvada, $482,559.
• LAFARGE West Inc., Denver,  $455,375.

Sources: El Paso County Clerk and Recorder’s Office; Mulliken Weiner Karsh Berg & Jolivet, Colorado Springs