Hanging low and dark over the ornate fixtures, polished leather daybeds and postcard-beautiful balconies of the newly restored Western Hotel in Ouray, where a night’s stay can cost $700, is what one worker calls “a cloud that is concealing a lot of what happened there.”
It is a cloud thick with liens and lawsuits, with small-town subcontractors who say they’re not being paid, with years-long delays and seven-figure overruns, with relationships irreparably harmed.
“It was terrible. I’ve never seen a job run that way,” said Gordon Mull, a fire suppression subcontractor who has been working on construction sites for close to 50 years. “That poorly, I guess is the word.”
A general contractor quit and painters walked off the job after months of nonpayment. An underground crew refused to show up without written assurance it would be paid. After one screaming match, a sprinkler installer and the hotel’s owner stopped talking. The liens total $205,000.
“They said, ‘We’re going to pay, we’re going to pay.’ I think my mistake is that I trusted them,” said Armando Reyna, whose painting company is allegedly owed $32,000.
Contractors and subcontractors who spoke to BusinessDen about problems on the prized project placed blame overwhelmingly on one man: Kyle Zeppelin, the head of the hotel’s Denver’s based-owner, Zeppelin Development.
They say this is a pattern for the company. And they vow to never work with Zeppelin again.
“I don’t care how many jobs Kyle Zeppelin has built or his father has built. I don’t care how big they are, it makes no difference. The communication that that man has when dealing with contractors is the worst that I’ve ever had an experience with,” Mull said.
While acknowledging there were considerable disputes during the project, Zeppelin Development said it proudly stands by its work on the Western Hotel. It blames criticisms of the firm and its owner on contractors who did deficient work and then overbilled Zeppelin.
‘The hell with it’
The Western Hotel was built in 1891 as a low-rent boarding house for miners, complete with a basement tunnel for prostitutes to sneak through. It was bought for $2.5 million in late 2020 by Zeppelin, which also developed the eye-catching Source Hotel in Denver’s RiNo neighborhood.
Kyle Zeppelin told BusinessDen at the time he thought a $4 million restoration of the closed hotel could be completed by July 2021.
In April of that year, Zeppelin hired Vertix Builders out of Firestone to be the general contractor. Vertix had built Kabin, an apartment complex on Zeppelin’s Taxi Campus in RiNo, and planned to do other work there until the Ouray project soured it on Zeppelin. (Two companies that recently worked at Taxi say they are still owed $2.36 million. An architect that worked on the Source Hotel sued in 2018, claiming to be owed nearly $1 million.)
“We knew his reputation going in, there’s no doubt about it,” said Vertix President Ryan Bonner. “We knew many general contractors who he wouldn’t pay at the end of the job and then tried to negotiate a lesser amount. It’s just a tactic that he has used many times over.”
Bonner thought Kyle Zeppelin’s plans for a summer 2021 opening were a pipe dream but that seven months might be enough time. That, too, proved to be unrealistic.
“He couldn’t make decisions on design and the architect couldn’t get their plans complete because he kept changing things. Then, during the construction, he constantly made changes that sent us backwards,” Bonner recalls of the project. “It was very frustrating.”
By July 2022, Bonner had had enough. Vertix terminated its contract and left Ouray.
Mull, who owns Dynamic Fire Protection Systems in Montrose, initially wasn’t worried about Vertix’s departure. He’d seen general contractors back out of projects before without detriment and could see there had been a lot of tension between Vertix and Kyle Zeppelin.
“But quite honestly, that was probably the worst thing that could have happened,” Mull said by phone as he thought back on Vertix’s exit. “It was pretty bad, in my opinion.”
Reyna, who started Mountain Custom Painters about five years ago, had been hired by and gotten along with Vertix. As it left Ouray, Reyna says a Vertix executive gave him some parting advice: “You have to be careful. These guys have a history of not wanting to pay.”
With Zeppelin Development now acting as the general contractor, Mull began butting heads with Kyle Zeppelin. At issue was an underground water line for the sprinkler system; state approval took considerable time. It all came to a head during a 30-minute phone call.
“I can’t think of the last time that I had an argument with someone with that language that was used,” said Mull, who called the talk “heated” and “nasty.” “So, I told him, ‘Fine. If you want your underground work done, the hell with it, I’m not going to get involved anymore.’”
“It seemed like every time you talked to him, it was always an argument. Always an argument,” Mull said of his conversations with Zeppelin. “After that argument I had with him, I didn’t talk to him. I wouldn’t communicate with him. I said, ‘That’s it.’ I wasn’t going to talk to the man.”
‘To the end’
After Vertix walked away from the hotel project, Reyna and his crew of professional painters heeded its warnings and demanded to be paid by Zeppelin up front. At first, the arrangement worked. But an October 2022 invoice went unpaid in November and December.
“By the second week of January, I was like, ‘You know what? I’m sorry but they don’t want to pay.’ They were saying that they went over the budget and had overspent, so they didn’t want to pay us or the drywaller and a couple other subcontractors,” Reyna said.
“They said, ‘We’re not going to pay, we’re not going to pay, we don’t want to pay.’ So, I stopped my crew, picked up my tools and we took off,” Reyna said.
That invoice was never paid and Mountain Custom Painters never returned to the jobsite. It was a disappointing end for painters who are based in nearby Olathe and had been recruited by Vertix while painting a house across the street from the Western Hotel.
“More than the money — though of course, you know, I’d like to get paid — we just wanted to finish it,” Reyna said while driving through Ouray last week. “I think that’s what upset me the most. I was just really excited to post the pictures and make a big thing about it.”
Reyna paid his employees with money that he had set aside to pay the Internal Revenue Service. In April, he filed a $32,143 lien on the Western Hotel, joining Vertix’s $160,910 lien. In late May, Dynamic Fire Protection Systems filed its own $12,137 lien.
“All of the things that we did for them that were over and above what you usually do on a job — did I charge for all of them? No,” Mull said. “Did I charge for some of them? Yes. Am I going to get paid? I don’t know. It’s really bad how the job was run and organized after Vertix.”
Adam Larkey, the chief operating officer at Zeppelin Development, said Mull and Reyna were paid enough.
“Every single trade and contractor that has worked on this project has been paid in full per their base contracts. The issue has been that Vertix, and three of their subcontractors, out of a total of almost two dozen vendors, are requesting additional payments for non-approved change orders of undefined scope or negligent work,” Larkey told BusinessDen.
“Not only has Mountain Custom Painters been paid in full of their base contract but they were paid an additional $100,000 on top of that. When they submitted an additional $30,000 invoice for undocumented work, we withheld payment until those charges could be justified.”
“Furthermore, much of their work, for which they were paid, has been required to be redone, including all decks that were not coated to work for winter conditions,” Larkey said. “Painting remains a major subject of warranty claims that we are currently pursuing.”
Vertix tried without success to foreclose on its mechanic’s lien in late January and then sued Zeppelin in February, accusing the developer of breaching their contract by not paying.
The next month, Zeppelin countersued Vertix, claiming the general contractor delayed the Western Hotel’s completion by understaffing the project, not supervising subcontractors and not quickly acquiring a fire suppression permit. Vertix also cost it money by refusing to solicit competitive bids for fire suppression and painting, among other trades, Zeppelin says.
“While we can’t comment specifically on any ongoing legal matters, this is a general contractor who was largely absent from the job site, with a history of overbilling, defective workmanship and refusing to honor warranty claims,” Zeppelin Development said in a statement.
“For context, the amounts in question amounted to a tiny fraction of the overall budget,” the developer said of the $205,000 in liens filed by Bonner, Mull and Reyna. “While this is an unfortunate situation, we look forward to getting it resolved amicably.”
Zeppelin has one other recently completed project in the high country: a hotel consisting of individual A-frames near Winter Park Resort. The A-Frame Club opened in January. Last February, a plumbing subcontractor sued Zeppelin for allegedly kicking it off the job site and keeping $15,000 worth of its tools. Zeppelin denied that and, in a countersuit, accused the plumber of doing shoddy work. The case was settled out of court in January.
Bonner, the president of Vertix, feels compelled to make his case at trial on behalf of unpaid contractors everywhere. Trial dates may be set during a hearing Thursday. That trial would play out in an Ouray courtroom just 1,000 feet from the Western Hotel’s door.
“I feel that it’s my obligation to take this thing as far as I can, to try to get to a point where he cannot do this anymore,” Bonner said of Zeppelin allegedly not paying contractors.
“That’s what I told my attorney,” he said. “That we will go to the end, no settlement.”
‘It got done’
The Western Hotel opened in May after a restoration that cost $15 million and took two-and-a-half years. Though its basement spa isn’t finished yet (“I won’t do it for them, no way,” Mull said snidely), the hotel has garnered glowing reviews over the past month.
“Despite these challenges, Zeppelin delivered on a widely acclaimed historic restoration that was recently named the ‘Crown Jewel of Southwest Colorado,’” the firm said in its statement. “The Western stands as the only surviving three-story wood structure of its type in the Rocky Mountain West and the oldest continuously operated hotel in the state.”
Reyna said he and his painting crew are proud to have worked on “this really beautiful project” and still regret that they couldn’t complete it. Mull said he doesn’t regret working on the Western Hotel but regrets the headaches it caused an excavator friend who he hired.
“It was a pain, a real pain, to get this thing done,” he said. “But it got done eventually.”