An investor group led by real estate broker Vivian Dimond will take over the partially built H3 Hollywood development, with plans to finish construction, settle subcontractors’ liens and partially repay buyers.
“I think it’s a great location,” Dimond told The Real Deal of the site just west of downtown. She said her investor group hopes to resume construction of H3 Hollywood “very soon” and will likely market the property at 2165 Van Buren Street as a rental apartment building instead of a condominium as originally planned.
“Most probably there is a need for apartments more than for condos,” Dimond said. Construction of H3 Hollywood will take 16 to 18 months to finish, at a cost of $23 million to $28 million, she said.
Hollywood Station Investments halted construction of H3 Hollywood last fall after finishing 13 floors of the planned 15-story, 247-unit building. The developer said in a letter to buyers of 150 condos — who had put down 50 percent deposits — that it was seeking financing to complete the project.
Hollywood Station Investments, managed by Diego Besga of Team Real Estate Management, had presold 60 percent of the units at prices starting at $250,000. Fortune International Realty handled sales. Construction had been expected to be completed by December 2016 or January 2017.
LB Construction will transfer ownership of the H3 Hollywood property to Dimond’s investor group as part of a confidential settlement she said she negotiated with the general contractor, which owed money to 34 subcontractors that worked on the H3 project.
LB Construction bid $250,200 more than its $15.8 million court judgment for an unpaid lien against Hollywood Station Investments. “We won on a credit bid of $250,200,” said Peter Berlowe, an attorney for LB Construction.
LB Construction’s bid to acquire the partially built residential building in Hollywood is subject to a 10-day objection period. If no one formally objects, the clerk of court will issue a certificate of title, or a clerk’s deed, transferring ownership of the assets of the H3 project to LB Construction, which, in turn, will transfer title to Dimond’s investor group.
Dimond said her investor group, which she declined to identify, will take title to the H3 property from LB Construction in exchange for paying all 34 subcontractors that filed construction liens against Hollywood Station Investments for unpaid bills. “They all got paid Tuesday,” Dimond said, and LB Construction “delivered releases from all the subs.” She declined to specify the amount of her group’s payment to the subcontractors.
Dimond also said her investor group bought a first mortgage loan on the H3 property from a lender in Rhode Island for $7.35 million. The lender had made a “bridge loan” to Hollywood Station Investments “so they could get a construction loan later on. And that didn’t happen,” she said.
“We bought the note under one entity. We have a different entity that is taking the title [to the H3 property],” Dimond said. Her investor group will file for foreclosure on the mortgage loan against the entity that takes title to H3 Hollywood to remove claims against the property and make it easier for her group to obtain a construction loan.
“It is complicated,” she said. “That’s why a lot of people have walked away from it,” even though other investors considered trying to revive the H3 Hollywood development.
Dimond’s investor group also plans to provide partial compensation to individuals who made deposits to buy H3 units as condos. She said $19.3 million is the total amount deposited, citing information from Hollywood Station Investments.
“We are setting aside a huge sum of money, in the millions, to compensate them … [but] they will never be compensated 100 percent.” Dimond said, calling settlements with depositors “the most painful step” in reviving the H3 Hollywood development.
“It would have been cheaper if we had decided to foreclose” on claims by depositors instead of compensating them, she said. “But we could have had opposition. I don’t like to get into fights if it’s not necessary. I like to try to be fair.”
H3 Hollywood is the among the latest projects to be canceled, put on hold or delayed amid a slowdown in the condo market this cycle, as the strong U.S. dollar and foreign economic turmoil continue to dampen sales. Other projects that have halted sales and delayed construction include the Related Group’s Auberge Residences & Spa Miami, a planned condo project near downtown Miami.
Brown Harris Stevens recently acquired Dimond’s residential real estate brokerage Avatar Real Estate Services, which has offices in Coconut Grove and South Miami and focuses on the luxury market. Avatar, now be called Brown Harris Stevens Avatar, and will continue to be led by Dimond, who founded the firm in 2002.