The Wolstein Group and Fairmount Properties claim their long-anticipated closing was almost derailed by an architectural firm's effort to get paid for its work. The developers say they do not have the money to pay Forum Architectural Services LLC until after the financing closes.
A rendering of the office building and hotel at the Flats East Bank project by Forum Architectural Services LLC. The project's developers sued the architectural firm Monday, claiming that Forum was trying to derail a long-delayed closing because of unpaid bills for its drawings and other work.The developers of the $275 million project filed a lawsuit Monday against Forum Architectural Services LLC, a Cleveland firm that has crafted site plans and designs for a mixed-use neighborhood at the mouth of the Cuyahoga River.
After years of effort, the Wolstein Group and Fairmount Properties are scheduled to close on their financing Tuesday -- the crucial step to lock in the public and private money to build an office tower, a hotel, a parking garage, retail and park space. But the developers claim their closing was almost derailed -- and that the project was nearly destroyed -- because of Forum's efforts to secure payment for its work.
According to court records, the financially strapped firm has been withholding its drawings and other work from the Flats project until it gets paid. The firm and its subcontractors have received $3.1 million but potentially are owed several million dollars more -- money that the developers claim they cannot afford to pay until the financing closes. Without access to the drawings, lenders including Wells Fargo Bank, which has pledged up to $53 million for the office building, were unwilling to sign off.
On Monday, a Cuyahoga County judge issued a temporary restraining order against Forum, barring the firm from interfering with the drawings or trying to slow down the project. The dispute over unpaid bills and ownership of the drawings is still unresolved, but Judge John P. O'Donnell indicated that the Flats developers might succeed in their claims that they own the drawings and are entitled to use and share them.
"We're obviously pleased with the judge's ruling, as it allows the project to continue," developer Scott Wolstein wrote in an e-mailed statement Monday afternoon. "It's one of many hurdles we've had to overcome to get this far."
The developers did not provide additional comments.
And representatives of Forum said little Monday. "From our side, from day one, we never intended to disrupt finance closing on the deal," said Mike Spittler, a principal at Forum. "We just always asked that we be paid."
The Flats developers still hope to start construction this year. They're on a tight timeline, with office tenants who are anxious to move and deadlines required by the federal stimulus program, which provided the city with a way to lower the cost of bonds for the project. Accounting firm Ernst & Young, law firm Tucker Ellis & West and real estate company CB Richard Ellis plan to move from other downtown locations into an office building in the Flats in 2013.
Designs for that and other buildings on the site came from Forum, which has remained a part of the project through the recession and a collapse of the commercial real estate and construction industries. Public records show that during the past several years, Forum lost its line of credit and amassed a pile of unpaid payroll tax bills from the IRS. In a letter filed as part of the court case, Forum's lawyer attributed these problems to unpaid bills for the Flats East Bank work.
In November, Forum contacted URS Corp., a consultant working on the project, and asked for its drawings and materials back because of the payment dispute. URS returned the documents. Court records show that the consultant said it would not use Forum's work until the architectural firm granted written permission. URS did not respond to a request for comment Monday.
The Flats developers have asked Judge O'Donnell to confirm that they control Forum's drawings and to award them more than $75,000 on claims including breach of contract and slander of the property's title. The architectural firm filed a lien on the Flats property Dec. 1.
A follow-up hearing is scheduled for Jan. 3.