Grim news for Colorado Crossing creditors

The 40 or so Colorado Crossing project lienholders who convened last week for their first creditors’ meeting were hoping for some good news.

But with $15 million in assets and $80 million in liabilities, including almost $20 million owed to the general contractors, subcontractors, suppliers and consultants, the likelihood they would be paid anything, let alone paid in full, appeared dim.

The situation grew worse last week after the CEO of SRKO Limited Family Partnership, Colorado Springs resident Jannie Richardson, filed for personal bankruptcy. According to court documents, Richardson’s assets amounted to $4 million while her liabilities totaled $49 million.

A casualty of the worst downturn since the Great Depression, it will be up to a U.S. Bankruptcy Court judge to decide the project’s fate. For now, the massive development, once dubbed “Colorado Springs’ second downtown” sits vacant and unfinished, a sobering remnant of the real estate bubble.

Calls to Thomas Quinn, Richardson’s personal bankruptcy attorney, about why Richardson’s personal debt was so large were not returned. It appears, however, that the developer took out millions in personal loans to keep Colorado Crossing’s first phase afloat.

Her largest personal creditors included Capmark Finance, owed more than $16 million, and retired Colorado Springs banker “Buzz” N.A. Rieger, owed $4.26 million.

Quinn and SRKO attorney Lee Kutner appeared with Richardson at the March 25 hearing in Denver, along with about 15 attorneys representing the lienholders. Also present was Trevor Young, the lawyer representing five local companies that had filed mechanics liens against SRKO.

“There really were no revelations,” he said.

That wasn’t what any of the creditors were hoping for.

In better days

Few would have predicted that the 153-acre project would hit the financial skids.

Located along the Interquest Parkway corridor, near flourishing north El Paso County neighborhoods, the 1.6-million-square-foot hotel-office-retail-residential development promised welcome services and shopping.

What’s more, Richardson was a cash-rich veteran entrepreneur who had developed and owned numerous successful commercial properties in Colorado and California.

Unlike more traditional developers who leveraged their projects, often to maximum levels, she preferred the pay-as-you-go approach.

She was lucky because she was able to fund her own developments — and welcomed small investors, many from her own Korean-American community. As many as 43 family members, including direct relatives, invested in various SRKO projects, though their total exposure was “less then 1 percent,” she said.

But the tides turned.

By mid-2008 Richardson found herself marooned by tight credit. She had already poured tens of millions of dollars in land planning, soils engineering, entitlements, infrastructure and marketing when she set an appointment with a lender who had promised to finance the completion of Colorado Crossing’s first phase.

But by waiting too long, she lost not one, but a series of lenders who either declined to finance the project or to cover her obligations at what she believed were fair terms.

As the economy slid into recession, Colorado Crossing’s appraised value eroded quickly. At one time, the nine-acre first phase with its unfinished multiplex theater, parking garage, two office and retail buildings was worth an estimated $50 million to $60 million, according to SRKO. But that was no longer the case and, by last month, the property’s loan value was closer to $15 million.

G.E. Johnson Construction pulled its crews from the office and retail buildings in September 2008. Remaining construction shut down when Richardson sent crews home in January of this year.

Leery of ‘loan sharks’

What Richardson calls “predatory lenders” offered to give her 20 to 25 cents on the dollar before SRKO filed for Chapter 11 bankruptcy Feb. 10.

“I’ve had offers from loan sharks who just want to loan to own my property — not to pay off my liens,” she complained.

Richardson still holds out hope of some kind of miracle.

“Seventy percent of the subcontractors got along with me. Thirteen companies worked with me until the very end. They’ve tried to help in lots of ways.”

She said she had counted on continued support from G.E. Johnson.

“They are big enough that they could just write off the loss, but their subcontractors couldn’t,” she said.

She said her ability to stay current on accounts payable was diminished when the contractor pushed to complete work on its project months ahead of schedule.

“Because of the economy, they could bring in extra crews. I needed more time; I was running out of my own money and planned to get financing, but it was too late.”

G.E. Johnson’s Jim Johnson said he had tried to work with Richardson on a plan to pay him almost $9 million owed to the company, but her offer to trade land in lieu of payment wasn’t realistic.

“The land she offered was now valued at fraction of what was owed. It just didn’t work for us,” he said.

An outside investor?

Under Chapter 11 bankruptcy rules, no one will get paid until the court approves a reorganization plan. At this point, there is little or no money to distribute. But SRKO still controls plenty of land.

Trading land for debt, however, might not be an option.

“Our group of subs does not want the property. If it was just us, it might work, but there are so many other liens and encumbrances,” Johnson said, adding that navigating layers of claimants would be too difficult.

He said if Richardson is ultimately unable to pay her obligations, an outside investor might be the answer.

“We’d look for them to assume ownership and clean things up,” Johnson said.

Karl Berg, another attorney also representing some of the subcontractors, said his clients might end up losing more if a third party entered the picture.

“If a new investment group takes over at the 11th hour, they’d be in first position. That would trump all secured creditors,” he said.

Yet with so few options available to her, Richardson said she hopes a buyer for the project steps up.

“I wanted Colorado Crossing to be a win-win for me and for the city. I wanted to bring jobs and new companies, but I never realized how bad the economy would be.”

The SRKO Limited Family Partnership owes about $20 million to its creditors. The following is a list of those with a Colorado connection:

SRKO’s SECURED CREDITORS*	AMOUNT OF CLAIM**
3D Web Media, Boca Raton, Fla.	$ 9,890
ABC Supply Co., Denver	721
Banner – Denver	55,607
Barton Supply – Aurora	123,852
Bible Electric – Colorado Springs	690,121
Big Horn Plaster — Littleton	132,586
Blueprints, Inc.– Colorado Springs	26
Brickstone – Arvada	146,668
C&C Sand and Stone – Colorado Springs	153,824
Carlson Systems, Inc. – Omaha, Neb.	1,310
Colorado Doorways — Denver	56,557
Colorado Machinery – Pueblo West	2,557
Concepts – Colorado Springs	9,610
Concrete Management – Littleton	2,768,682
Consolidated Electrical Distributors – Denver	26,356
CPS Distributors — Westminster	30,078
CSV/Volvo Rents – Colorado Springs	33,775
Denver County Treasurer – tax lien	2,336
Douglass Roof – Commerce City	382,510
Drake Williams – Greenwood Village	2,135,582
E Light	498,996
Eddie Bishop – Colorado Springs	53,500
Entech Engineering – Colorado Springs	136,008
Firebaugh Precast – Colorado Springs	2,491
Front Range Redi-Rock – Colorado Springs	91,534
Gardner Signs — Longmont	39,813
G.E. Johnson – Colorado Springs	8,400,000
General Ceiling and Partition – Colorado Springs.	488,737
Glover Masonry — Arvada	482,559
Grace Sealants – Colorado Springs	33,409
Grainger – Colorado Springs	4,123
Gypsum Products – Colorado Springs	10,900
H&E Equipment – Colorado Springs	46,393
Harding Nursery – Colorado Springs	45,161
Herbian Insulation — Arvada	45,855
Honeywell, Inc./Novar – Tempe, Ariz.	17,599
Horizon Glass – Denver	244,944
Interstate Mechanical — Elbert	70,000
J.C. Jones – Colorado Springs	78,138
Ken Caryl Glass — Littleton	33,750
KWAL Paint — Denver	154,709
LaFarge – Colorado Springs	455,375
LPR Construction – Loveland	240,838
LSC Transportation — Denver	$ 14,246
Mechone, Inc. – Colorado Springs	129,762
Midwest Arricade – Colorado Springs	1,606
NES, Inc.—Colorado Springs	75,784
Obermayer Rebmann — Philadelphia	3856
Olson Plumbing – Colorado Springs	1,121,919
Onsite Lighting & Survey – Buffalo, Minn.	33,643
Otis Elevator – Colorado Springs	120,831
Overhead Door – Colorado Springs	11,236
OZ Architects – Boulder	404,937
Pacific Coast Supply — North Highlands, Calif.	23,884
Parker Steel — Parker	25,076
Penton Media — Chicago	4,036
Perkey Steel — Colorado Springs	278,378
Pikes Peak Steel – Colorado Springs	5,825
Powers Thermal Insulation – Colorado Springs	82,079
R&R Engineers — Denver	1803
Rampart Supply – Colorado Springs	6,356
Regency Lighting – Van Nuys, Calif.	16,380
Rial Heating & Air Conditioning – Colorado Springs	219,969
Rio Grande — Denver	980,672
RK Mechanical — Denver	250,438
Rockwell Consulting – Colorado Springs	83,735
Rolling Plains – Henderson	61,474
Schuman Communications – Colorado Springs	70,722
Sherman & Howard – Colorado Springs	2,623
Sherwin Williams – Colorado Springs	1,043
Simplex Grinnell – Colorado Springs	201,646
Smelker Concrete – Colorado Springs	1,500
Stresscon – Colorado Springs	1,859,886
Superior Roofing — Aurora	18,445
Taylor Fence – Colorado Springs	7,649
Thyssen Krupp – Colorado Springs	125,576
Top Quality Drilling — Northglen	16,831
Transit Mix – Colorado Springs	1,268,619
Tropwen Enterprises – Colorado Springs	1,803,795
U.S. Metals — Denver	7475
Whitecap — Chicago	24,007
Windsor – Colorado Springs	197,685
World of Tile — Englewood	8,073

*Value of property subject to lien = $15 million ** Rounded to nearest dollar.

Personal bankruptcy filing

Statement of financial affairs and schedules