February 22, 2008 3:38 PM
Joseph Freed not buying land, hasn't paid vendors on Gates project
[BY]By John Rebchook
[BODY]Joseph Freed and Associates, the Chicago-area group tapped as the developer of the $1 billion Gates project two years, has not paid a number of local firms it hired for recent work on one of the highest-profile developments in Denver.
And while an executive at Freed told the Rocky Mountain News this week that the firms will be paid, the private company’s relationship with the property, now called Metropolitan Gardens, has changed.
Freed no longer will buying 24 acres of the property that it had under contract off of Santa Fe Drive, near Interstate 25. It also will not be buying the other 23 acres of the property off Broadway.
“Our relationship with Freed has changed somewhat,” said Ferd Belz, the president of Cherokee Denver LLC, a subsidiary of Cherokee Investments in Raleigh, N.C., which owns the 42-acre site.
Belz said it was a “mutual decision,” between Cherokee and Freed for them to no longer buy the land.
Freed, however, may stay on board, but more as a developer that is paid a fee to construct buildings and find tenants, with Cherokee remaining as the land owner, Belz said.
Cherokee also may sell land to users or developers, much like it recently sold a 5-acre piece to Trammell Crow Residential, where it is constructing a luxury apartment community.
Belz said he recently learned that Freed had not paid some of its vendors, which included architects, consultants, engineers and others.
Asked if he was surprised and disappointed, Belz said: “I would say that is a good way to characterize it. We believe they should meet their financial obligations. We have made it absolutely clear they need to meet their financial obligations. Truly, this is unfortunate. We are very concerned and we do not want this to stain or taint the project.”
Consultant David Phifer said his firm, ACCU Inc., said his firm is owed $35,000, for 450 hours of work his company completed between September and December.
“I’ve been working in Denver since the ‘70s, and this is the first time I have not been paid,” he said.
Phifer said he knows a number of architects, engineers and others who have also not been paid by Freed. Phifer estimated Freed owes subcontractors as much as $1 million, while others have said it may be as much as $1.5 million.
"Freed has had all of this glorious buld-up in the press, and then they go and stiff all of our local vendors," Phifer told me. "That is just not OK."
Reportedly, one prominent Denver architect, who did not return my call, is owed $500,000.
Belz told me he first learned of the plight of the subcontractors from an architect, who called to ask him if there was anything he could do.
"This is a pretty small town, where everyone knows each other," Belz told me. "Word gets around pretty quickly."
Steve Jacobsen, senior vice president of Freed, said the vendors will be paid.
“Absolutely, they need to be paid,” Jacobsen said. “I wish they could have all been paid last week or the weeks before. We are working with Cherokee to get them paid as soon as possible. I'm not dodging anyone's call. I'm being very upfront with everyone. Everyone will be paid.”
He said David Darden, CEO of Cherokee Investments in Raleigh, and Larry Freed, CEO of his namesake firm, personally are working out a deal to assure that the Denver subcontracors are paid. The two also are shaping the ultimate relationship that Freed will have with Metropolitan Gardens.
Jacobsen said that he doesn't have a date.
"I don't want to tell you it will be settled on Tuesday, for example, because you would quote me on that, and if something happened and we didn't pay everyone, it would look back," he explained.
When I told Phifer what Jacobsen told me, he was pleased. Still, as of Friday morning, he told me he had yet to hear a peep from Freed.
Jacobsen declined to elaborate on its relationship with Cherokee on the project, but confirmed Freed is no longer going to buy the land, given the current, sluggish retail market.
The only tenant publicly identified is Robert Redford's Sundance Cinemas, which plans a six-screen movie theater. “That deal is currently in place,” Jacobsen said, declining to elaborate beyond that. He noted that in general, while retailers are still opening new stores, they have become much more conservative with expansion plans. It doesn't matter what part of the country, he added - all retailers are being more cautious than they have been in the past few years, which is understandable given the recession fears.
“I’m still very bullish on this project," Jacobsen said. "Personally, I think it is a great piece of dirt. When you think of 42 or 43 acres of Urban land at Broadway and I-25 and along light rail, there is not a better transit-oriented development site in Denver."
When completed, Metropolitan Gardens is projected to have more than a million square feet of retail; more than 2,100 residential units; 510,000 square feet of office; and two hotels.
[PS]rebchookj@RockyMountainNews.com
or 303-954-5207
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