Litigation in the long-contentious Colorado Crossing suit took a decidedly forward step last week in U.S. Bankruptcy Court.
Colorado Crossing developer Jannie Richardson and SRKO Family Limited Partnership owe 40 contractors and subcontractors more than $17 million from the derailed development in northern Colorado Springs.
Colorado Crossing was the vision of developer Richardson and her company, but the project ran into cost overruns and lack of financing, and in 2010, Richardson declared bankruptcy for both herself and her business.
Creditors include Stresscon, Transit Mix Concrete, Schumann Communications, Rio Grande Co., Otis Elevator, Honeywell, Inc., Olson Plumbing and Heating, Glover Masonry, GE Johnson Construction Co., Drake-Williams Steel and others.
Once dubbed “Colorado Springs’ second downtown,” Colorado Crossing was to have included office, entertainment and retail space, multi-family housing and hotels. Half-finished buildings remain at the 153-acre development.
Only 17.5 acres were developed on the property before SRKO encountered financial problems in 2008, just as the bottom fell out of the banking and housing markets.
Too much debt led to the bankruptcy filing. Denver resident C. Randel Lewis was named trustee.
Last week, U.S. Bankruptcy Judge Sidney Brooks heard three motions and ruled on two, delaying the third until May.
Brooks ruled on where the profits will go from the sale of Richardson’s property at Colorado Crossing.
Proceeds will be split 35 percent to Richardson’s private estate and 65 percent to Colorado Crossing creditors, explained Jim Johnson, president and CEO of GE Johnson.
Court papers show SRKO and Richardson owe GE Johnson more than $2 million.
Brooks also ruled that the trustee of the estate may hire auctioneer NRC Realty & Capital Advisors to auction the land and partially developed portions of the Colorado Crossing property.
“There’s a debate as to what the property’s worth,” Johnson said.
Reached later, NRC Realty & Capital Advisors Vice President David Levy said details have yet to be finalized.
“We have to begin working with the trustee,” Levy said. “Details of the auction will be coming in the next several weeks. I know this is a property that has a long history in the community.”
Whether the property will be sold in one parcel or several is “one of the details we’ll look at,” he said.
At last week’s bankruptcy hearing, the judge also approved another motion that provides clear and insurable title on Richardson’s property within the Colorado Crossing development. Some of the land did not have a clear title.
“There were plenty of opportunities for Jannie Richardson to get this cleaned up [in the four years since filing bankruptcy], but she didn’t,” said Peter Speiser, CPA for GE Johnson. Speiser attended last week’s hearing.
Now the land looks more attractive for developers to buy, Speiser said.
The third motion spelled out the two paths the development will follow from now on. One of the two will find success at some point in the future, Speiser said.
One path is to auction the entire parcel as one campus. Now that the title has been cleared, “it becomes much more attractive, much more valuable,” Speiser said.
The second path would be if a third party were to fund a reorganization plan. A group called ITG Taxable Fund LLLP from Florida is pursuing funding a reorganization plan, Speiser said.
This motion was delayed until May 22.
“It’s encouraging to finally see some movement headed to a resolution,” Johnson said. “It’s been a long process.”
“It’s an absolute nightmare.”
– Mike Trapp, creditor
“It’s a good location,” he said. Johnson also said he would return to work on the project if it’s a “developer I’m comfortable working with, and they’ve got to want to work with our firm.”
Court papers indicate SRKO owes close to $1 million to Olson Plumbing and Heating. Owner Mike Trapp called the hearing “generally, a move in the right direction.
“This thing has been going on for seven years. It’s a travesty of justice that it has taken this long,” Trapp said. “It’s an absolute nightmare.”
Trapp said his company will not go back to work at Colorado Crossing, though he believes the development eventually will prosper.
“I really think it’s a viable deal,” Trapp said. “It’s been a really bad experience, and I don’t think I want to live it again.”