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Gates developer falling behind in paying firms

Chicago group is also backing out of land purchases

By John Rebchook, Rocky Mountain News (Contact)

Published February 23, 2008 at 12:05 a.m.

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Metropolitan Gardens is a mixed-use 83-acre redevelopment project to be built on land once occupied by the Gates Rubber Co. along South Broadway south of Interstate 25.

Photo by Joseph Freed And Associates Illustration

Metropolitan Gardens is a mixed-use 83-acre redevelopment project to be built on land once occupied by the Gates Rubber Co. along South Broadway south of Interstate 25.

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Joseph Freed and Associates, the Chicago group tapped as the developer of the $1 billion Gates Rubber Co. redevelopment two years ago, has not paid a number of local firms it hired to work on the project.

Although an executive at Freed told the Rocky Mountain News this week that the firms will be paid, the company's relationship with the property, called Metropolitan Gardens, has changed.

Freed no longer will buy 24 acres of the property it had under contract near Santa Fe Drive and Interstate 25. It also will not buy 23 acres near Broadway it had an option on.

"Our relationship with Freed has changed somewhat," said Ferd Belz, president of Cherokee Denver, a subsidiary of Cherokee Investments in Raleigh, N.C., which owns the site.

Belz called it a "mutual decision" between Cherokee and Freed.

Freed may still be on board as a developer paid to construct buildings and find tenants, with Cherokee remaining as the owner, Belz said.

Cherokee also may sell parcels of land; it recently sold five acres to Trammell Crow Residential, which is building luxury apartments.

Belz said he recently learned that Freed had not paid some architects, consultants, engineers and other vendors.

"We have made it absolutely clear they need to meet their financial obligations," Belz said. "We are very concerned, and we do not want this to stain or taint the project."

Consultant David Phifer said his firm, ACCU Inc., is owed $35,000 for 450 hours of work the firm completed between September and December.

Phifer estimated Freed owes subcontractors as much as $1 million. Others have said it could be as much as $1.5 million.

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."

He said he didn't know when they would be paid and declined to comment on why they weren't paid on time.

He also declined to elaborate on Freed's relationship with Cherokee but confirmed Freed is no longer going to buy the land, given the 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.

"I'm still very bullish on this project," he said. "Personally, I think it is a great piece of dirt."