Colorado Crossing developer in debt

The developer of Colorado Crossing has failed to pay about $10 million she owes to more than two dozen construction industry companies for work they've done on her ambitious commercial and residential project on Colorado Springs' far north side, according to documents filed with the El Paso County Clerk and Recorder's Office.

That revelation runs counter to comments earlier this week by Springs developer Jannie Richardson, who said she was largely unaffected by the nation's economic and credit woes. She expects to complete the first phase of her project, to be anchored by a 14-screen Cinemark movie theater complex, over the next three to four months. It's under construction southeast of Colorado Highway 83 and InterQuest Parkway.

Contacted this week, Richardson initially said she was unaware of the unpaid bills, but in subsequent conversations said she intends to pay them.

Still, some company executives and their attorneys say the millions in unpaid bills are an unusually large amount for a construction project, and the financial consequences could be dire for Richardson and the companies involved awaiting payment. If she doesn't pay, a judge could order the sale of her property to satisfy the debt, although such a sale could be more than a year away, said the attorneys.

Richardson says she expects to obtain financing in the next several weeks to help her pay her bills. Yet, the nation's credit crunch could derail her efforts to get funding.

In better economic times, developers could borrow on a short-term basis, using equity in their property to obtain a loan and pay bills, said Karl Berg, a construction attorney with Mulliken Weiner Karsh Berg & Jolivet in the Springs and who represents General Ceiling and Partitions Inc., one of the companies that's owed money.

Now, lenders either won't make loans or have set borrowing standards so high that developers increasingly are coming up dry, he said. It's a problem many local and national developers have encountered in recent months, regardless of their finances or the quality of their projects.

While Richardson seeks financing, some of the unpaid companies have mounting bills of their own. General Ceiling and Partitions laid off about 40 of its 200 employees because of Richardson's failure to pay, said Brian Pring, owner of the 22-year-old Springs company. He said he's owed about $500,000.

"We're still in business, we're not in danger of closing," Pring said. "But you've got a lot of people (employees) that you're helping to pay bills for ... and that obviously had an effect on them."

Rocky Hoffschneider, operations director for Concrete Management Corp. in suburban Denver, said Richardson owes him $1.3 million. He said he's laid off 25 of his 150-200 employees after she broke several promises to pay. Her failure to pay "is just killing everybody," he said Wednesday, two days after walking off the job.

"It doesn't matter how big you are," Hoffschneider said. "That kind of money has got to hurt."

The 153-acre Colorado Crossing is envisioned as 1.6 million square feet of offices, stores, housing and entertainment, according to Richardson's plan. It would be one of the city's largest mixed-use projects, portions of which are being designed in a town square fashion.

G.E. Johnson Construction Inc., the Springs' largest locally based general contractor, and 26 of its subcontractors and suppliers are seeking payment from Richardson's SRKO Family Limited Partnership, according to documents filed with the El Paso County Clerk and Recorder's Office. Richardson also heads Sunshine Development Co.,, although land records show Colorado Crossing is held in the SRKO name.

Four mechanic's liens were filed against SRKO in September and October by General Ceiling and Partitions, G.E. Johnson, Rolling Plains Construction of Henderson and Grace Sealants Inc. of Colorado Springs according to Clerk and Recorder's Office records. A fifth lien was filed Sept. 30 by Parker Steel Co. of Parker against Sunshine Development.

The liens total $8.69 million, said Jeff George, a partner with the Springs office of law firm Hogan & Hartson. He specializes in construction law and represents G.E. Johnson.

Another lien seeking payment of $1.3 million was filed Tuesday against SRKO by Concrete Management Corp. That lien is in addition to the ones filed by G.E. Johnson and its subcontractors. Concrete Management Corp. has worked on the parking garage and theater.

Mechanic's liens are legal claims brought by contractors and subcontractors who haven't been paid or who question a payment, and are common in the construction industry when disputes arise. The $8.69 million lien is the largest lien G.E. Johnson has been involved with in its 41 years in business, and the company is owed about one-third of that amount, said President Jim Johnson.

He said Richardson hired his company as general contractor to oversee construction of three office and retail buildings that are part of the $65 million first phase of Colorado Crossing. In turn, G.E. Johnson brought on subcontractors, which do day-to-day work such as electrical, plumbing and drywall.

On Sept. 3, after weeks of being told by Richardson that she was on the verge of obtaining financing, G.E. Johnson notified subcontractors to halt work and discontinue services or purchases related to the project, Johnson said. Most of the work stopped immediately, and about 60 percent of the buildings were completed. General Ceiling and Partitions continued work on a building entry facade for about three more weeks to ensure the work site was safe, Johnson said.

Despite G.E. Johnson's decision, Richardson said Wednesday she has other crews working to complete the office and retail buildings. She has said she expects to finish Colorado Crossing's first phase, including the Cinemark complex, parking garage and office and retail buildings, in three to four months.

To date, G.E. Johnson has been paid about $3.5 million for its work, Johnson said. Beginning in May, however, payments stopped, he said.

Still, Johnson said he believes Richardson is working to obtain financing.

"She's out there working like crazy," he said. "She's trying to make it work. I'm confident she'll get there. I'm not confident if it's two weeks or two months. That I can't tell you."

Until then, legal action will continue on the mechanic's liens.

George, G.E. Johnson's attorney, said the next step is to ask a 4th Judicial District Court judge for permission to foreclose on the liens. That request probably will be filed within 10 days, he said.

Unlike a home foreclosure that plays out over a few months, action to resolve the mechanic's liens could take more than a year. A judge's decision to allow a foreclosure on the liens would follow a civil suit that probably would take months, Berg said. If a judge allows the foreclosure to proceed, Richardson would have another three to four months to pay off the debt, George said.

If Richardson hasn't paid her bills by that time, the roughly 9 acres developed so far and the buildings on the site would be put up for sale, with proceeds going to the companies that filed the liens, George said. He added he doesn't know the property's current value.

G.E. Johnson was not hired to build the Cinemark theater complex and a 1,059-space parking garage, which also are part of the first phase. Richardson said she's overseeing those projects. Her general contractor for the theater and garage, Derek Mans of Mans Homes LLC of Colorado Springs, said Wednesday he hasn't been at the site for several weeks. He said he plans to ask the Pikes Peak Regional Building Department to let him withdraw as general contractor for the theater and garage.

Richardson said during the summer she attempted to refinance one of her other properties, but wound up realizing several million dollars less in working capital than she had expected from that deal.

Richardson concedes she'd prefer to wait another 60 days so that she could finish the Cinemark complex, parking garage, entrance roads, landscaping and other on-site improvements, which would enhance her ability to obtain financing and pay off G.E. Johnson and the subcontractors. Also, completion of the first phase would improve her chances to obtain a long-term, permanent loan, which would carry a lower interest rate than if she obtained a higher-interest, short-term loan, she said.

"If I can wait for 60 days, I'd be all finished," she said. "I have enough money to finish my first phase. I'm almost there."

Asked about subcontractors with cash-flow problems or who have laid off employees, she said, "I can't help it right now. I've got to finish my project, so I have enough money to pay off all of them.

"It is really tough. I'm not going to try to deny I don't owe people money. I owe some money. But I feel very confident I'm going to pay it. They can wait. I don't know if they have a choice. I don't know if I have a choice .... At least I'm working. At least I'm trying everything I can."

Cinemark spokesman James Meredith said Tuesday he was unaware of Richardson's financial issues and couldn't speculate on any effect they might have. The Texas-based theater chain plans to open its Colorado Crossing complex in the first quarter of 2009, he added.

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