Contractor: Trustee should oversee bankruptcy of Colorado Crossing partnership

An independent trustee should be appointed to oversee the bankruptcy of the partnership that’s building the Colorado Crossing mixed-use project because of alleged dishonesty, mismanagement, conflicts of interest and unrealistic financial projections by developer Jannie Richardson, a contractor and subcontractor told a bankruptcy judge this week.

The trustee could determine the best interests of contractors and subcontractors who are owed millions of dollars for work at Colorado Crossing, according to a motion filed in U.S. Bankruptcy Court in Denver. The trustee also could investigate a number of “difficult-to-discern” transactions related to Colorado Crossing and involving Richardson, entities that she controls or her family members, the motion stated.

The motion was filed by G.E. Johnson Construction Co. of Colorado Springs, a general contractor for a portion of Colorado Crossing, and Stresscon Corp., also of the Springs, which built the project’s parking garage.

The request for a trustee is the latest in a series of motions stemming from the Feb. 19 Chapter 11 bankruptcy filing by the SRKO Family Limited Partnership, the developer of Colorado Crossing. A Chapter 11 petition typically results in a plan to reorganize debts and move forward.

Richardson, a longtime Springs developer, is the sole member and manager of DUK LLC, which, in turn, is the general partner and 1 percent ownerof SRKO, according to the G.E. Johnson and Stresscon motion. Richardson often represented herself as Colorado Crossing’s developer in interviews; in addition to SRKO’s bankruptcy, she filed a personal Chapter 11 petition a few weeks later.

As envisioned, the massive, 150-acre Colorado Crossing project was to include 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.

Construction started about three years ago on an initial phase, which include the theater, garage and three office and retail buildings, southeast of InterQuest and Voyager parkways. But by fall 2008, work was grinding to a halt. Many companies that worked on the project filed legal claims — known as mechanic’s liens — that said they hadn’t been paid. Those claims total about $26 million, according to an SRKO tally that was included as a part of the G.E. Johnson and Stresscon motion.

The Colorado Crossing site now resembles a ghost town, with empty and partially finished buildings standing on a roughly 10-acre portion of the property.

Richardson declined to comment Friday. It’s unclear when SRKO must respond to the motion for a trustee.

Among other claims, the motion states:

• SRKO most recently valued its assets at $38.6 million and liabilities at $82.1 million. An appraisal for SRKO valued the Colorado Crossing property at $15 million on Nov. 1.

• Since November 2008, SRKO has unsuccessfully tried to secure financing to complete the project. One estimate conducted for SRKO suggests it will cost $9 million to complete the project’s initial phase. However, additional information provided by SRKO showed another $1.5 million is needed for furniture, fixtures and equipment for the theaters.

• Based on information provided by SRKO, the project would have secured debt of $39 million — a construction loan plus the mechanic’s liens — when finished. Yet the project would only generate $2.8 million to $4.5 million a year in revenue from 2011 through 2016.

• Given the potential financial difficulties ahead, Richardson has maintained a singular focus of finishing the project, apparently to preserve equity for family members, the motion says. She’s also maintained the project is “virtually” complete, despite buildings that lack walls and windows. “Richardson’s failure to act reasonably in light of the facts known to her ... constitutes gross mismanagement,” the motion states.

• Richardson also “engaged in fraudulent acts to induce parties to continue to work on the Colorado Crossing project ... and generally engaged in dishonest acts to the determent(sic) of her creditors who are also creditors in this bankruptcy case,” the motion states. Also, Richardson caused SRKO to “enter into numerous sham transactions whose purpose was to create artificial sales comparisons to obtain favorable appraisals” for SRKO’s real estate holdings.
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