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Real Estate & Construction  October 22, 2010

Slow-pay issues dog Grove developer

FORT COLLINS – By this time next year, Fort Collins could be home to The Grove, a massive student housing complex proposed by a North Carolina-based developer that has built similar projects nationwide.

Neighbors are adamantly opposed to the 12-building complex on 31 acres along Centre Avenue because of the potential influx of 600 Colorado State University students into their backyard. But subcontractors who worked on Campus Crest Development’s last Colorado project have a different concern: Those who work on The Grove could spend months chasing their money once it is completed.

“If they’re going to do a job in Fort Collins, I’m going to tell (the three or four other plumbers capable of doing such a big job) to look out,´ said Ron Bernhardt, owner of Fisher Mechanical Contractors in Evans. His company did the plumbing work on The Grove in Evans, a Campus Crest project that opened three years ago. “I feel like it’s my responsibility to tell these guys – and they’re my competitors – you’re not going to get your last payment. These guys are slick operators. They know how to work it.”

The proposal

Campus Crest, based in Charlotte, N.C., has built student housing projects in 11 states. It broke into the Colorado market in 2007, when it built the $18 million Grove concept at 3202 11th Ave. in Evans. The project was on a fast track to open before the fall of 2007, moving from dirt work to landscaping in about six months.

Around that same time, Campus Crest officials began talking with the CSU Research Foundation, one of many developers interested in building a student housing project for the college. CSURF then put out a request for proposal for student housing on land it owns south of the Gardens at Spring Creek on the western side of Centre Avenue. Though CSURF owns hundreds of acres in the area intended for commercial and industrial uses, this particular parcel has always been zoned for multi-family, according to Kathleen Henry, president/CEO of CSURF.

“We were thinking about the need, and there did seem to be some great needs for housing that the university couldn’t stay up with,´ said Stuart MacMillan, real estate executive for CSURF.

He said as part of the RFP review, CSURF officials visited a Grove project at Baylor University in Texas, liked what they saw, and awarded the project to Campus Crest. Last year, CSURF signed a formal long-term lease agreement with Campus Crest. Under the agreement, Campus Crest will manage and maintain The Grove as well as build it.

The developer hopes to begin construction in December and open in time for fall semester 2011. The project must first pass the hurdle of the Fort Collins Planning and Zoning Board, which met Oct. 21 after this edition of the Business Report went to press.

City staff has recommended that the P&Z Board approve the project. Nearby residents, however, have different ideas.

“There is significant opposition,´ said city planner Steve Olt. “In two neighborhood meetings, there were between 50 and 102 people there. They are adamantly opposed to the project.”

That opposition could throw a wrench in the proposed timeline.

“There is reasonable chance there could be an appeal (by neighbors) if the board were to approve it,” Olt said. “But if the planning and zoning board were to deny it, there’s a good possibly the developer would appeal.”

Olt said city staff can only rate the project itself against city code.

“We cannot evaluate a project based on the company’s reputation,” Olt said. “The neighbors are concerned about the nature of this company. They will be saying that. (The developer) has to be evaluated based on the merits of their own project. I can’t speak for what happens in Evans and other communities.”

The Grove in Evans

Area subcontractors remember that Evans job – many not fondly.

During the six months after The Grove in Evans opened, 20 subcontractors filed liens against the project totaling almost $2 million through the Weld County Clerk and Recorder.

Several contacted by the Business Report said the project was rushed and poorly organized in the four to five months they were on the job, and it took several months to finally get paid after some hard negotiating.

“I’ve never worked with anybody that pulled these kinds of stunts,´ said Roberta Mead, office manager for Air Experts in Evans, which did all the heating and air conditioning work on the Evans project. “They kept putting us off.”

“They’re pretty slow to pay,´ said Kelby McCall, owner of McCall Development and Construction in Lufkin, Texas, who built the clubhouses on the Evans complex and one in Nacogdoches, Texas, at the same time. “It took six to eight months to get my money. But I finally got it, all but $2,000. They owned me nearly half a million and they were trying to bargain with me. I knocked off $2,000, and they paid me in a day.”

Many of the Evans subcontractors got their lawyers involved, spending thousands to keep Campus Crest to their word. Mead said her company paid $5,000 in attorney’s fees to get its money.

Some settled for 50 cents on the dollar for fear of losing all money owed them. Others used leverage to get paid.

“My whole contract amount was somewhere around $100,000 and it was the last $60,000 I couldn’t get them to pay,´ said Cole Dean of Dean Contracting in Windsor, who installed the fencing for the Evans project. “I basically refused to warranty their gates until they paid me.”

Still other contractors walked off the job to drive home their point. Larry Warkentin of Warkentin Electric in Greeley was one.

“If you don’t pay, we don’t show up, and we did do that,´ said Warkentin, who filed a $98,941 lien on the project six months after it was completed. “Once, we didn’t show up for days, and they freaked out, so it worked.

“Normally, we’d expect final payment to take no more than a couple of months,” he added.

Issues widespread

Subcontractors on the Evans job said they had heard about issues with payments from others who had done business with Campus Crest before. But the company does pay, eventually, they said.

Campus Crest officials say they’ve successfully completed 99 percent of the contracts they’ve had on $650 million worth of projects nationwide. The so-called delays, they said, had to have been for questionable work and timing, in very isolated cases.

“We have a fiduciary responsibility to the towns we build in, and stakeholders and residents to make sure the quality of construction is what we want,´ said Shannon King, executive vice president of Campus Crest. “If someone files a lien, it could be a timing issue. We fully intend and do pay all subcontractors who perform quality work within the scope that we contract for.”

Tim Pribble of Pribble Lawn and Landscaping in Greeley, however, said he doesn’t think all of the Evans subcontractors weren’t performing. He filed a lien of $113,686 two months after the job ended, and a second one in January 2008 for a remaining $12,164. He said he still didn’t get his full amount.

“If you had one person you’re unhappy with and didn’t pay, sure, but I can’t believe they were unhappy with siders, roofers, painters, landscapers, all those people,” Pribble said. “They hurt numerous people.”

Bernhardt of Fisher Mechanical, who filed a $222,842 lien on the property, said for him the writing was on the wall in the middle of the job. He said Campus Crest paid down that lien amount to the last $100,000, and he finally settled for $50,000 of that to be done with it.

“I’ve been doing this since 1971, and I knew what was coming down,” Bernhardt said. “If you call anywhere they’ve built, they do the same thing. Most people pay their bills. There’s some people, it’s just the way they operate.”

Par for the course?

While many subcontractors had to work just as hard to get their money as they did on the job, some say it’s no different than working on any other large contract.

It took six months for Schaefer Drywall Systems in Windsor to get its final payment of $33,180 for the Evans Grove. While not the most pleasant experience, co-owner Cyndi Schaefer said that wasn’t atypical.

“Six months is not unusual for a project of that size,” Schaefer said. “Is it the worst experience I’ve ever had? No. I’ve had worse, when people declared bankruptcy and moved across the country.”

Many of the bigger projects, such as some of the big-box retailers, are just as bad if not worse, said McCall of Texas.

“My buddy here, he did the Home Depot dirt work and had to file a lien on them for $90,000,” McCall said. “He said it happens all the time. People you think could pay, don’t.”

Mike Flynn, hired by Campus Crest as the superintendent on the Evans project, said he couldn’t speak to the financial issues subcontractors had with the company, but said the project was not unusual in construction.

“I really didn’t see anything different than what happens every day in construction,” Flynn said. “These days, everyone wants to get paid right away.”

Despite the concerns, many of the subcontractors do say the Evans project was a quality one, and a good job to get especially in this difficult economy.

And, payment issues aside, some of the contractors said they’d be interested in working for Campus Crest again, but maybe structuring the relationship a little differently.

“We still made decent money on the project,” Warkentin said when asked if he’d consider doing another job with Campus Crest. “I would have to be convinced that they’re still a viable company.”

McCall agreed. “I was probably going to do some more projects with them, just handle it a bit different and not let them get behind. The contractors out here, that’s how they handled it.”

King of Campus Crest said they plan to quell any fears with their project by doing good work.

“We truly endeavor to be a complementary component to communities in which we operate,” she said. “We’re excited about Fort Collins and I know we can provide a quality living experience for students.”

Former superintendent Flynn added: “It was a really successful job. I liked the whole concept. I don’t think people in Fort Collins should be concerned at all. It was a great thing.”

For an update on the proposed project in Fort Collins, click here.

FORT COLLINS – By this time next year, Fort Collins could be home to The Grove, a massive student housing complex proposed by a North Carolina-based developer that has built similar projects nationwide.

Neighbors are adamantly opposed to the 12-building complex on 31 acres along Centre Avenue because of the potential influx of 600 Colorado State University students into their backyard. But subcontractors who worked on Campus Crest Development’s last Colorado project have a different concern: Those who work on The Grove could spend months chasing their money once it is completed.

“If they’re going to do a job…

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