Unfinished HUD project
Sun, Jan 8th, 2006
posted by Allva
Developer suing HUD over Broadway project
12/23/2005
As published in Express-News
Alleging the U.S. Department of Housing and Urban Development wrongfully took over management of the stalled Villaje del Rio mixed-used project, the owner is seeking a temporary injunction to prevent a sale of the loan.
George Geis, owner of Villaje del Rio Ltd., obtained a temporary restraining order last week, the first step in his pursuit of a trial that he hopes will lead to a permanent injunction.
Geis filed the lawsuit to prevent HUD from going ahead Dec. 14 with a competitive-bid sale of the note, an action his attorney said would have forced the downtown property into foreclosure.
Construction stopped in October 2004 after a dispute between Geis and the general contractor, Dallas-based Andres Holding Corp. Deutsche Bank Berkshire, which was financing the massive 4.5-acre riverfront project, pulled out in June. It turned the loan over to HUD.
HUD officials would not comment, and bank officials did not return telephone calls.
A hearing on a temporary injunction is set for Thursday before state District Judge Andy Mireles.
The project, beside Broadway and Interstate 35, was designed to include 253 apartment units, 48,000 square feet of office and retail space, and a multistory parking garage. It is the largest development Geis has done.
In the lawsuit, Geis' attorney, Thomas G. Kemmy, argues that HUD's interference in the project enabled the contractor to accelerate his monthly draws from the construction budget beyond his actual progress.
However, "We categorically deny that we were overpaid," said John W. Slates, attorney for Andres.
HUD insured a $26.7 million loan held by Deutsche Bank Berkshire, and both entities oversaw progress of the construction. By mid-March 2004, Geis, his attorney and the supervising architect were advising HUD officials that Andres' completed work was not proportionate to the amount he had been paid.
"Andres was going to run out of money in the concrete section within months and would try to force the owner into default and shut the job down," Kemmy told the court.
HUD officials and the bank pressured Geis under threat of foreclosure to accept the draws, attorney Kemmy said. From May 4, 2004, onward, HUD and the bank managed all pay requests, he said.
Geis estimated that construction was proceeding at a rate of 2 percent a month while the draws were going through at a 4 percent monthly rate. With his options limited, Geis said, he fired Andres.
When work halted in October 2004, Andres had been overpaid more than $2.5 million, Geis said.
Andres said the project was 71 percent complete; Geis claimed it was 51 percent complete.
Geis' dispute with Andres is continuing through separate litigation and is currently in arbitration.
Andres alleges Geis' conduct resulted in delays and caused the shortfall, attorney Slates said. He said the monthly draws could not have taken place without approval of the owner, the architect and HUD.
Geis said he stuck to the contract.
"Everything that I did was trying to help the job," he said. "All I ever did was trying to help the contractor."
Since the stalled project went into arbitration, Geis said it has been examined by both a project consultant he hired and consultants hired by Smith UniCorp., HUD's due-diligence contractor.
Their assessments of the work ranged from 40 percent to 61 percent complete, Geis said.
Local oversight of the project for HUD came from Elva Castillo, multifamily manager in the San Antonio office. When asked about the lawsuit, Castillo deferred questions to the Fort Worth regional office.
Patricia Campbell, the agency's regional spokeswoman, said, "We wouldn't comment about anything that is currently in litigation."
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