Developer sues Portland over failure of Midtown project

Troy R. Bennett | BDN
Troy R. Bennett | BDN
The sun sets over Portland's Bayside neighborhood in this May 17, 2018, file photo.
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Florida-based Federated Cos. alleges in a complaint that the city failed to live up to its contractual obligations and left the developer in the lurch.
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A Florida-based developer is suing Portland over the “catastrophic” failure of a development project in the city’s Bayside neighborhood.

Federated Cos. on Friday filed a 78-page complaint, which names City Manager Jon Jennings as a defendant, in U.S. District Court in Portland, alleging that the city failed to live up to its contractual obligations and left the developer in the lurch.

The complaint asks for breach-of-contract damages exceeding $75,000, as well as attorneys fees and other costs, but a spokeswoman for the developer told the Portland Press Herald that its actual damages are estimated to be in the “eight figures.”

The complaint accuses the city of failure to abide by relevant contractual obligations, failure to pay “sums rightfully due under said agreements” and denial of Federated’s building permit application, among other charges.

In the court document, Federated Cos. said it “spent nearly a decade and millions upon millions of dollars in vain developing and pursuing plans for a vibrant mixed-use development project” consistent Portland’s comprehensive plan for the Bayside neighborhood.

Following a seven-hour discussion on Jan. 14, 2014, the Portland Planning Board gave the green light to the first phase — consisting of a single 165-foot-tall tower with 235 apartments, 44,000 square feet for restaurants and shops on the first floor and more than 700 parking spaces in a 75-foot-tall parking garage — of the $150 million development along Somerset Street on land once the site of an industrial scrapyard. After two subsequent phases, the complex was slated to feature a total of four 165-foot-tall towers, 700,000 square feet of residential space, 100,000 square feet of retail and more than 1,100 garage parking spaces.

Opponents criticized the development as too massive for Portland and in conflict with such guiding documents as the comprehensive plan and Bayside vision drafted in 2000.

The following month, a group opposed to the project, Keep Portland Livable, filed a lawsuit in Cumberland County Superior Court to block the first phase of the Midtown development. In October 2014, Federated Cos. agreed to scale back the development as a compromise to end the litigation, shrinking the four proposed towers to between 72 feet and 92 feet in height, just more than 87,000 square feet of street-level retail space and only one parking garage with 800 spaces. The total project cost fell to about $85 million from between $100 million and $150 million.

The Planning Board approved the revised proposal at a meeting in March 2015.

[Major development in Maine’s largest city appears dead]

But “[a]s the project shrunk in size, the City’s support for it correspondingly lessened, and the

temper of the City’s interactions with Federated noticeably changed,” the complaint reads.

“In what would become a significantly detrimental pattern of ‘bait and switch’ … the City ultimately abandoned Federated, its longstanding partner, and left the developer in the lurch,” the complaint reads.

The complaint alleges that the city inflicted millions of dollars of damage upon the developer
“through its years-long pattern of imprudence and obstruction. … The results have been nothing short of catastrophic for Federated and, equally and unfortunately, the public at large.”

[Bringing life back to Bayside: Portland’s proposed Midtown project at the forefront of master planning movement in Maine]

The Press Herald reports that the developer waited until February 2018 to file for a building permit to begin construction of the first phase of the project. But the city denied the building permit after Federated allegedly failed to pay more than $80,000 in traffic mitigation and other costs and did not post a required performance guarantee, the Portland newspaper reports.

Federated Cos. also has faced litigation recently over its role in the Midtown development. In May 2018, a Vermont construction firm, PC Construction Co., filed a lawsuit in federal court claiming that Federated Cos. broke contracts and played a corporate “shell game” to avoid paying for more than $235,000 worth of work on the $85 million project.

Patrick Venne, who represented Federated Cos., dismissed the suit as “frivolous” and told the BDN at the time that PC Construction’s contract states it would work for free unless another company were selected to build Midtown.

In June 2018, PC Construction submitted paperwork to dismiss its federal case following discussions with Federated Cos.

 



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