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Some really high-priced penthouses in a new Kakaako condominium tower are now caught up in a legal battle over construction of the building at Ward Village.
Nordic PCL Construction, the general contractor for the ultraluxury Waiea tower, filed an application for a mechanic’s lien in state Circuit Court on Friday, claiming a security interest in 18 units that include two unsold grand penthouses on the market for $35 million and $36 million.
The filing by Nordic could stymie efforts by Waiea’s developer, Howard Hughes Corp., to sell units worth around $150 million or more in the year-old tower, possibly including units on the cusp of being sold.
Nordic’s move follows a lawsuit filed Nov. 21 by Hughes Corp. against Nordic that claims the construction firm did substandard work, missed deadlines for substantial completion and went over budget.
Nordic, in its lien application, contends Hughes Corp. was responsible for the tower’s late completion and cost overruns. The contractor’s complaint said Hughes Corp. lagged on finishing the tower’s design, got city building permits in an untimely fashion, didn’t provide permanent electrical power to the site, furnished special materials late and made numerous design changes.
“The original substantial completion date was rendered impracticable due to numerous factors beyond (Nordic’s) control,” the lien filing said.
NORDIC also said Hughes Corp. directed the construction firm to do “everything within its power” to finish most of the tower by Oct. 17, 2016, including paying overtime, re-sequencing work, touching up flaws after buyers completed their purchases and finishing some tower elements after residents moved in — all as part of a “frantic effort” to deliver units to buyers in November 2016.
Hughes Corp. has collected a roughly estimated $575 million from buyers of Waiea condo units averaging $3.6 million.
The developer said in its lawsuit that work on the tower that opened last December is still incomplete and contains defects. Hughes Corp. seeks damages “well in excess of $75 million.”
Nordic claims that Hughes Corp. unreasonably refused to extend the project completion deadline, and then in May criticized Nordic’s work and refused to pay an outstanding balance. Nordic got paid $284 million for Waiea work and claims it is owed another $39.7 million.
Mike Betz, district manager of the Honolulu-based construction firm, said in a statement that the company made every effort to resolve the situation amicably before Hughes Corp. filed its lawsuit, and that Nordic and its subcontractors and vendors have not been paid for work on units the developer has sold.
A couple of subcontractors — Critchfield Pacific Inc. and BEK Inc. — have filed their own mechanic’s lien applications tied to Waiea.
NORDIC said in its filing that it was surprised by the developer’s contentions, and noted that Hughes Corp. awarded Nordic a contract to build another Ward Village tower, Ke Kilohana, in October 2016.
Ke Kilohana is scheduled for completion in 2019. Hughes Corp. also has a tower called A‘eo rising, and finished a tower called Anaha in October at Ward Village.
Hughes Corp. previously said the Waiea construction dispute won’t affect any ongoing or future work at Ward Village.
Nordic’s lien application basically claims the contractor has a secured interest in 18 Waiea condos, including 15 unsold units, one unit bought by the developer and two bought by other entities.
Four of the units are townhouses along Ala Moana Boulevard where units have their own private swimming pools, gardens and garages. One similar unit sold earlier this year for $5 million.
Two of the condos subject to Nordic’s lien application were bought earlier this year for around $5 million each. One is owned by Japan-based White Dream Inc., and the other is owned by two people from China, Bohai and Zhicheng Gao.
Another eight units are unsold penthouses, including the two most expensive residences in the 174-unit tower.
Scott Batterman, a partner at Honolulu law firm Clay Chapman Iwamura Pulice & Nervell who has given seminars on mechanic’s liens, said contested cases can become complicated litigation and inhibit the sale of units involved.
“It can get messy,” he said.
Honolulu law firm Cades Schutte is representing Nordic on its lien case. Hughes Corp. is represented in its litigation by Honolulu-based McCorriston Miller Mukai MacKinnon and attorneys with Kirkland & Ellis in Chicago and Los Angeles.
Batterman said a lien is a security interest claim in the real estate, and can be thought of as analogous to a mortgage on the property. It is possible for a developer to post a bond that can be paid out if a lien is approved.
Under Hawaii law, a judge must decide if a lien is warranted and at what value, Batterman said, adding that if a lien is deemed appropriate by a judge, then the contractor still has to file a lawsuit to foreclose on its lien.
According to a Sept. 30 Hughes Corp. financial report, five Waiea unit sales were scheduled to close by Dec. 31.
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