BiggerPockets

Had to post this. Anyone down in Texas familiar with the project?

Sinking Texas Gulf Coast Condos to Be Demolished

By THE ASSOCIATED PRESS
Published: September 21, 2009
Filed at 8:33 p.m. ET

BROWNSVILLE, Texas (AP) -- Touted as the Texas Gulf Coast's most luxurious tower and later ridiculed as the ''leaning tower of Padre Island,'' an incomplete 31-story condominium project on South Padre Island will be demolished, its developer announced Monday.

The Ocean Tower, a 151-unit luxury project slated for a spa and other amenities, started construction in 2006, but stopped last summer when it became obvious the tower was sinking more rapidly than attached parking garages, causing cracks in beams and columns.

A lawsuit filed by developer Ocean Tower LP last year said the tower's core had sunk 14 to 16 inches, while the attached garages sank less than half that amount. Ocean Tower is seeking $125 million in damages from two engineering firms.

''Unfortunately, multiple engineering studies have led us to the conclusion that it is not economically feasible to complete the building and to provide the caliber of condominium tower that we intended to build,'' a prepared Monday statement from Ocean Tower LP said.

Demolition was a difficult decision, said Michael Caddell, a lawyer for Ocean Tower. He estimated the developer invested some $65 million in the project.

''There was really not a good way to fix the building economically,'' Caddell said. ''Even if it were repaired there would always be a stigma attached to that building.''

Ocean Tower LP had maintained until late last year that the problem would be remedied. It estimated in the lawsuit filed last summer that repairs would cost $20 million to $25 million.

Named in the lawsuit are geo-technical engineers Raba-Kistner Engineering and Consulting of San Antonio and structural engineers Datum Engineers of Austin and Dallas. Zachry Construction's subsidiary Coastal Constructors, the project's general contractor, dismissed from the lawsuit.

Matthew Cano, an attorney representing Raba-Kistner, said he could not comment while the case was ongoing, but said ''I do think that we have both factual and legal defenses.''

Greg Ziegler, lead counsel representing Datum, also declined to comment beyond saying that Datum stands by its design.

The Ocean Tower was structurally complete and the interior work was under way when construction halted last summer. By November, developer Tony Domit told those who had made deposits for units that they would get their money back.

''With the future of Ocean Tower in serious question, we release you from your purchase agreement and plan to immediately return your earnest money,'' the letter read.

Court documents show those who contracted to buy condos typically made deposits of about $40,000. One contract listed the sale price of one unit at $399,000.

The Ocean Tower is expected to come tumbling down in grand fashion in mid-November.

Hired for the implosion job is Controlled Demolition Inc., best known for its Guinness World Record-setting implosion of the Seattle Kingdome.

More than 98 percent of the Ocean Tower's above-ground materials will be recycled or reused, according to the statement.

:D

I know it is terrible, but I just read this article again and laughed the whole way through. There's a lesson here somewhere.

I would not be surprised to hear that the engineer loses his license over this as well!

I'm more interested to hear about the inspector(s) who passed off this development throughout it's various stages over the previous three years. Experience has taught me that many inspectors hate to take on that liability of a passed inspection.

Interesting post indeed. What can be learned can only be learned in the details. I would hate to have been the soils engineer on this one.

More fun in development land.

I'm sure there are millions to choose from, but this is one I've been following in my own backyard. A failed condo development is in foreclosure. What amazes me is the negative monthly cashflow that this guy is looking at. $116,742 per month according to the article below. I haven't followed up on the South Padre Island project, but I recall seeing a piece on the tv showing the demolition.

Park Lafayette developer loses round in bankruptcy court
By Tom Daykin of the Journal Sentinel
Jan. 27, 2010 7:15 a.m.

The developer of the troubled Park Lafayette condominium towers on Milwaukee's east side will not be allowed to borrow funds from a local investment group as part of a bankruptcy reorganization.

Renaissant Lafayette LLC, a firm led by Chicago-area developer Warren Barr, had asked U.S. Bankruptcy Judge Pamela Pepper for permission to borrow up to $7.5 million from Mallory Properties LLC, which is operated by local real estate investors Frank and Dominic Giuffre.

Renaissant wanted to use the money to pay for its operating expenses at Park Layfayette, which has 280 units in two 20-story towers at N. Prospect Ave. and E. Lafayette Place.

That request was opposed by New York-based Amalgamated Bank, the main lender for Park Lafayette and the largest creditor in Renaissant's Chapter 11 bankruptcy filing.

Amalgamated is owed $102.8 million, and the debt is secured by the condo development and other Renaissant property, valued at $61.3 million, according to court records. Amalgamated objected to Mallory having a higher priority than the bank in recovering any money lent to Renaissant.

Pepper, in her ruling, said the financing terms involving a loan from Mallory wouldn't adequately protect Amalgamated. She instead allowed Renaissant to borrow any additional funds from Amalgamated, at a 12.5% interest rate, with the money provided from week to week to pay for the building's utilities, insurance and other expenses.

Those expenses are budgeted at $116,742 a month, once the building's rental income from leasing out condos as apartment units is taken into account, according to court documents.

Amalgamated has a foreclosure suit pending against Renaissant in Milwaukee County Circuit Court.