Contractor Seeks Buyer for Unfinished High-Rise Awarded in Default
One of the largest general contractors in the southeastern U.S. is seeking a buyer for a partially completed high-rise building it acquired by foreclosure when the developer defaulted on a $12.4-million civil award for nonpayment and breach of contract. Construction on the building in Jacksonville, Fla., was halted in December 2007, after an attached six-level parking garage partially collapsed during concrete placement on the top level. A laborer was killed and 23 other workers injured in the pancake collapse.
Berkman Plaza II, designed as a 23-story condominium tower with 222 residential units, was about 50% complete at the time of the accident, estimates Michael Hampton, chief operating officer for Atlanta-based Choate Construction Co., which had served as the project's general contractor. (ENR 12/17/07 p. 10). "There were 18 floors of concrete in the air on the property," but no windows. The derelict eyesore sits in the center of Jacksonville as the lawsuits wind their way through court.
Harbor Cos., Atlanta, the developer, expressed eagerness to resume construction when the Occupational Safety and Health Administration (OSHA) completed its report in May 2008, but the liens and lawsuits hindered action, and the general real estate collapse administered the coup de grâce.
Choate rejected a notice of termination Berkman Plaza II LLC, the owner, issued in June 2008. As required by the contract, the dispute went to arbitration, and, in February 2011, the arbitration panel ruled in Choate's favor on all the issues, awarding the contractor $12.4 million for liens, fees and costs. A lien valued at $10.2 million was included in that amount, and Choate subsequently sought to foreclose on it. The foreclosure was executed early last month. An April 29 online auction for the uncompleted building received no bids. Choate took possession and immediately began discussions with potential buyers.
"There has been a rash of calls this week because of the official foreclosure," says Choate's Hampton. "We've talked to well over a dozen developers." Choate has "no interest in developing the property," he adds. The contractor "would love to [complete]" the building for the new owner, he says. All the candidates the firm has interviewed want rental property. Until the sale is closed and the redesign for the building is known, he cannot say how much completing it would cost.
The City of Jacksonville has cited the property repeatedly for code violations resulting from neglect. Last year, it began fining the owner $250 per day for noncompliance. At ENR press time, the fines totaled $60,500, according to a Mayor Alvin Brown (D) spokeswoman. "Administrative fines remain with the property until compliance," she adds. "A new owner can apply for significant reductions when compliance is achieved."
In May 2008, OSHA cited Choate for three violations, and the two reached a settlement in 2009. OSHA'S report states, "The structural engineer of record (SER) designed the structure with critical flaws. His design did not meet the industry standards, and was extensively deficient." Soheil Rouhi of Structural Consulting Group LLC, Alpharetta, Ga., the SER, did not return calls seeking comment.
