Overtown affordable housing complex delays lead to legal battle

Construction was supposed to end in October 2017

1327 Northwest Third Avenue with Burke Construction CEO Anthony Burke and Boston Capital CEO Jack Manning (Google Maps)
1327 Northwest Third Avenue with Burke Construction CEO Anthony Burke and Boston Capital CEO Jack Manning (Google Maps)

UPDATED, March 22, 12:30 p.m.: A developer and general contractor’s fight over a $28 million affordable housing complex in Miami’s Overtown — including whether the project is even complete — is playing out in Miami-Dade Circuit Court.

St. John Plaza Apartments LLC — tied to Boston-based multifamily investor Boston Capital Corp., the local nonprofit St. John Community Development Corp. and real estate developer and financier Jim Watson — sued the general contractor of the apartment complex at 1327 Northwest Third Avenue in July, according to court filings.

Attorneys for the parties did not respond to requests for comment.

St. John CDC executive director Eric Haynes

St. John CDC executive director Eric Haynes

St John Plaza Apartments, a two-building project, aimed to bring 90 affordable housing units of up to three bedrooms to the neighborhood. It also promised about 8,500 square feet of commercial space, a daycare center, computer lab and a playground. Construction was set to finish in October 2017, according to an unrelated request for proposal filed by a separate Boston Capital and Watson partnership.

Instead, according to the developer’s lawsuit, Doral-based contractor Burke Construction delayed the project by almost two years. The developer accuses Burke of failing to supply enough proper materials and skilled workers for the project and failing to incorporate the daycare into its construction.

The developer seeks $3 million from Burke to put toward correcting what the developer describes as an unfinished project, according to the suit.

Yet, the property is offering efficiency and one-bedroom units for monthly rents of $916 and $958, respectively, with immediate move-in, according to a property manager.

Burke Construction sued the developer in August, alleging wrongful termination of contract and withholding payments, despite the two buildings of the apartment complex receiving temporary certificates of occupancy in June and July. The developer canceled inspections for the daycare in August, according to Burke’s lawsuit.

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The general contractor seeks more than $1 million owed on its $17 million contract and attorney fees.

The developer allegedly sent Burke a notice to terminate its contract in July, but Burke CFO David Martinez “was out of town and was not aware of the letter” until the next month, according to the suit. The developer’s missed payments have led to further litigation, the suit states.

“The failure to make payment has resulted in numerous lawsuits brought by subcontractors and material suppliers who provided services and materials to the project that [St John Plaza] is using but has not paid for,” according to Burke’s lawsuit.

Burke alleges that the developer and its consultants caused the initial construction delays. Plans for the daycare were incomplete when Burke signed the contract in March 2016, it alleges. The apartment complex received a notice of commencement that July, but more permit delays kept Burke from starting construction until December, according to the suit.

Indeed, Burke’s apprehensions about the project came across in a July 2017 letter included in Burke’s lawsuit. The project had already seen nine months of delays by that time, according to the letter.

According to the 2017 unrelated Boston Capital RFP, St. John Plaza Apartments’ financing sources included tax-exempt bond financing, low-income housing tax credit equity from Florida Housing Finance Corp., a county surtax loan, a fixed-rate forward permanent loan from Greystone and $10 million from the Southeast Overtown/Park West Community Redevelopment Agency.

Overtown has attracted developer interest this year. In May, the Miami-Dade County Commission granted Housing Trust Group a ground lease for a 10.4-acre property, which houses two existing public housing projects that the developer would redevelop: Rainbow Village Apartments and Gwen Cherry 23C. And a company tied to Michael Simkins purchased more than a dozen parcels in Miami’s Overtown neighborhood from the Southeast Overtown/Park West Community Redevelopment Agency in March.

St. John Plaza is not the only Overtown project to end up in court recently. Michael Swerdlow’s planned Block 55 Target-anchored mixed-use project is the subject of a court battle brought by three entities tied to developer Don Peebles.

Correction: A previous version of this story incorrectly included another fund that invested in the project.