Real Development’s Michael Elzufon texted Key Construction president Dave Wells Tuesday evening after learning that Key and Spangenberg Phillips Tice Architecture filed a lawsuit against the company seeking payment for almost a decade of what they say is unpaid work.
“Can this be real?” Elzufon says he asked.
“I don’t want to call it personal, but I worked … with these guys literally for 10 years,” Elzufon says. “There’s no words to describe … . It’s unbelievable.”
Wells says what’s unbelievable is how Elzufon and partner Dave Lundberg, known as the Minnesota Guys, hired Key, SPT and others for work that benefited their numerous downtown properties but went largely unpaid.
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“I don’t see how they can sleep at night,” Wells says.
Elzufon, Lundberg, their wives and several entities are named in the suit.
SPT is seeking $583,309.83 and Key is seeking $1,000,583.10. Both plaintiffs also are seeking interest and legal fees.
Wells says the money will go to the firms and more than a dozen subcontractors and consultants who worked on more than a dozen buildings the men from the Minneapolis-St. Paul area began buying in Wichita in 2004.
“We both feel like we have a moral responsibility,” Wells says of filing so others can be paid in addition to Key and SPT.
“Our goal would be to get everybody paid to 100 percent,” Wells says. “That’s probably not reality.”
The timing of the suit, which was filed Tuesday afternoon in Sedgwick County District Court, is related to the recent closing of the HUD loan for the Exchange Place project.
That’s a project Elzufon and Lundberg planned to revitalize the deteriorating Exchange Place and Bitting Building on the northeast and northwest corners of Douglas and Market – and add a new parking garage and apartment building where the Lerner and Michigan buildings currently are.
This is how Exchange Place and the lawsuit are – remotely – connected:
Wells says the city of Wichita agreed to provide funding for part of the project in exchange for Real Development agreeing to use proceeds from Exchange Place to pay for work they had others do at Wichita Executive Centre at 125 N. Market.
The Exchange Place project stalled in 2012 in part due to financial problems. Around that time Elzufon and Lundberg faced a state securities investigation. In February of this year, the two were each charged with 61 felony counts for alleged securities fraud and selling unregistered securities.
In late 2012, Texas-based developer John McWilliams took over Exchange Place, and Wells says he agreed to the same payment terms Elzufon and Lundberg had in exchange for city funding.
“John is paying people on projects that he has nothing to do with … because he is a really good guy,” Wells says. “He is trying to do what he thinks is right. He is trying to do what Michael and Dave never did.”
Elzufon says that’s what he would have done if he’d been able to stay involved in Exchange Place.
“I gave my life and everything – mentally, emotionally, physically, financially, spiritually and otherwise – to bring that project to fruition,” he says. “I fought tirelessly to ensure that as part of my project that all of these vendors were to be rewarded for all of the work that they did in our projects. … A whole lot of things changed, and my ability to participate and my ability to have a say in those things just became nonexistent.”
Lundberg says once they were out of the project, the responsibility shifted and should have been taken care of with the HUD loan closing.
“I don’t know why they’re looking to us.”
Wells says with the HUD closing, Key received 37.5 percent of the $598,665 it is owed for work at the Executive Centre and then was able to pay subcontractors some of what they’re owed. He says if there’s money available after the Exchange Place work is done, his firm and others will receive it, though he says he doesn’t anticipate it will be enough to cover what everyone is owed.
The lawsuit isn’t related to that money or work.
“It’s nobody else’s business to pay … but their own,” Wells says of Elzufon and Lundberg.
“They were the beneficiaries of all this work that was done on their projects,” he says. “The fact that they didn’t make money on them is nobody’s fault but their own.”
Wells says Key continued to be involved with Real Development “because there was so much going on” and there were promises of payment.
He says Elzufon was “an undercapitalized visionary.”
“They had the vision, and I will give them total credit for that,” says Ron Spangenberg, partner at SPT Architecture.
“We wished it could have happened as it started.”