Spokane Journal of Business

Vandervert Construction receivership sends ripples through industry

Subcontractors, other creditors mull options for collecting funds

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-—Mike McLean
As of late last week, work was at a standstill at the College Avenue Apartments project, at 1318 W. College, just north of the Kendall Yards neighborhood. Vandervert Construction had been the general contractor on the $3.4 million project.

(UPDATED 2/16/18 to include information from a statement from Vandervert Construction Inc.)

Coeur d’Alene-based Innovative Electrical Solutions LLC owner Aaron Kayser laid off four employees last week, a move he contends is a direct consequence of Vandervert Construction Inc. entering into receivership.

Kayser says the four former workers were dedicated exclusively to working on projects for the now-shuttered, Spokane-based general contractor.

“I don’t think I’ll see my $144,000,” says Kayser, referring to the amount Vandervert Construction owes Innovative Electrical. That figure is just a little more than 14 percent of the company’s gross revenue from 2017, he says.

Innovative Electrical is one of 350 creditors—businesses, individuals, and government entities—in 13 states and one Canadian province owed a total of $18.1 million by Vandervert Construction, according to Spokane County Superior Court records. At the end of 2017, the company reports $14.4 million in total assets. 

Control of the 42-year-old company was placed under receivership on Feb. 2, and the company is facing imminent liquidation.

Several attempts to reach Vandervert Construction owner and President Tim Stulc were unsuccessful before the Journal went to press.

On Feb. 14, however, the company released a statement saying Vandervert Construction began facing financial troubles after securing bids on substantial hotel projects in Washington and Oregon. After the start of construction, “several subcontractors refused to honor bid-day pricing,” says the statement. The Courtyard by Marriott in Pullman, Wash., and Marriott Towne Place Suites projects in Beaverton, Ore., and Lakewood, Wash., were completed last year but with cost overruns of $2 million.

“In addition to the operating losses on the hotel projects, Vandervert Construction’s cash flow issues were compounded by non-payment of third-party obligations that are owing to the company,” the statement says.

For subcontractors that are owed money, one recourse is to place liens on property on which they completed work. 

Kayser says he’s placed up to nine different liens on properties where Vandervert hired Innovative Electrical to do work. Kayser says he notified those businesses and property owners of his intention to secure payment of the debt before submitting the lien.

“It makes for an uncomfortable conversation,” he says. “Now we’re getting told that they paid Vandervert (Construction) to pay us, but we never got anything. Right now, we owe supply houses and whole bunch of subs underneath us. It makes a very large crater in the middle of the budget.”

Another Vandervert Construction creditor listed in court records is Spokane-based R&R Heating & Air Conditioning Inc. R&R has a $38,400 claim against the construction company.

“I work really hard to collect,” says R&R President Randy Hastings of not only Vandervert, but creditors in general. “In accounts receivable, after 30 days past due, we chase our money down hard.”

Related to Vandervert, Hastings says, “There’s been a lot back-and-forth conversation I’ve had with other subs calling me. And in some instances, you can tell where they may not have been as aggressive in going after what they were owed.”

A judge appointed Spokane law firm Davidson, Backman, Medeiros PLLC to serve as the general receiver for Vandervert Construction in an effort to help the company pay off as much of its debt as possible, court records say.

Firm partner Barry Davidson says his office is moving quickly to begin the process of paying off Vandervert Construction’s creditors. The assets include $2.5 million in property and equipment, including vehicles, trailers, and forklifts.

“Proceeds of sales of equipment and all other assets will be converted to cash to pay the creditors,” Davidson says.

The voluminous initial court filing detailing Vandervert’s financial obligations approaches 100 pages in length and details debts ranging from as little as $49 to Dallas-based 170-Praxair Distribution Inc., to the largest creditor, the Washington state Department of Revenue, which has a secured $2.1 million tax warrant against the construction company.

The state revenue department has a second claim, also secured, for $763,400, court records say.

Most of the other claims against the company are unsecured.

One of the larger six-figure claims against Vandervert Construction is a $654,000 indemnity claim that lists Dick Vandervert, who founded the company in 1975.

Vandervert says that amount is for a secured line of credit Vandervert Construction owes to Washington Trust Bank for which Dick Vandervert is the guarantor. Vandervert says he was willing to serve as the co-signer on the line of credit when he sold the business to Stulc between six and seven years ago.

“He (Stulc) has always made his payments on that credit line, so it hasn’t been a problem,” Vandervert says. “But if the receivership doesn’t pay on it, I could end up getting stuck with some of it. In a worst-case scenario … all of it.”

Adds Vandervert, “It’s a sad state of affairs. I’m so disappointed at where things are now.”

Today, Dick Vandervert operates Vandervert Development LLC, which does business as Vandervert Development & Hotels and is separate from Vandervert Construction.

Vandervert, 73, says he sold the general contracting business because he was approaching retirement age.

“The construction business is a hard business, and you don’t do just a little of it. It takes all of your time,” he says.

Vandervert says he operates 10 different property businesses with holdings mostly in Spokane—and a few in North Idaho. His businesses didn’t have any active projects occurring with his former construction company.

“I at least dodged a bullet there,” Vandervert says. 

A court-issued stay put a stop to all Vandervert Construction activity, and now, any potential future the company has rests with Davidson.

In entering into receivership, Stulc gave Davidson “sole discretion and authority” regarding whether to file for federal bankruptcy projection, court records say.

When asked about the prospect of filing bankruptcy, Davidson says, “There is no present intention at this time to move in that direction.”

Davidson says approximately 80 Vandervert Construction employees were laid off. However, in a strong construction economy, the majority have been offered jobs and most have returned to work at other companies, he says.

“There’s a real shortage of skilled workers in construction now, so that’s at least good news for the Vandervert workers,” Davidson says.

Doug Tweedy, the Spokane-based regional economist for the Washington state Employment Security Department, says it’s too early to determine what impact Vandervert Construction’s demise will have on the construction sector here, if it has an impact at all.

He says Vandervert Construction is in a position he can’t recall seeing previously.

“Usually, it’s a market decrease that affects the construction sector,” he says. “But the market’s been increasing the last couple of years. I can’t think of anything else to compare this to.”

The receivership marks a reversal of circumstances for Vandervert Construction, which in late 2016 described itself as being in a steep growth mode. The company had opened satellite offices in Bellevue and the Tri-Cities in recent years.

Vandervert reported $58.1 million in 2016 contract revenue, ranking the company ninth on the list of leading Spokane-area contractors as published in the Journal last June.

Recently completed projects included the $11.8 million Courtyard Inn by Marriott, in Pullman, and the $8 million My Fresh Basket grocery store in the Kendall Yards development, northwest of downtown Spokane.

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