A Florida-based owner of multifamily communities is suing Hines, a global real estate developer, for allegedly failing to make necessary repairs to a luxury apartment complex that was so riddled with construction defects that it was condemned, and its residents were forced to evacuate.
Southstar Capital Group filed suit against Hines over its alleged failure to disclose extensive hidden defects when selling the 306-unit apartment complex to Southstar for $67 million. The complex was developed and constructed by Hines and is located outside of Orlando in Celebration, a master-planned community near Walt Disney World that was developed by Disney.
The lawsuit accuses Hines and its affiliates of knowingly withholding, concealing and misrepresenting defective conditions at Aviva at Celebration apartments, now Sola at Celebration. Southstar purchased the newly built property from Hines in September 2016.
“Hines knew from the beginning that this property was fraught with construction defects and structural issues yet went ahead and sold us the complex for market price,’’ said Gina Williams, president and chief financial officer of Southstar Capital Group. “Hines needs to resolve this now before the property falls into further disrepair and the damage becomes even more costly.’’
The defects were not detected during the normal inspection process and only became apparent when the walls, breezeways, floors and balconies started to crack and deflect after Hines sold the complex. Subsequent inspections, which included removing layers of the walls and floors, revealed significant construction defects that violated local building codes. As a result, county officials ordered all residents to evacuate in August 2017, leaving Southstar with no rental income from the property for the past year.
Hines, through one of its wholly-owned affiliates, Urban Oaks Builders, the general contractor on the project, signed a contract to make repairs to the property, but as more hidden defects came to light, Southstar says they refused to continue the work. Based on Hines’ and its affiliate’s alleged unwillingness to make the property habitable again and restore it to its original value, Southstar had no other option than to file a lawsuit. Recently, Southstar put the property up for sale. Southstar owns and operates properties in Florida and Texas but is not a developer or construction contractor.
“Having this once beautiful property sit and rot serves no one’s interests. Every day that goes by, the water and mold damage in the buildings is getting worse,’’ Williams said. “For a global developer like Hines to simply walk away from a community is irresponsible and inexcusable.’’
Headquartered in Boca Raton, Fla., Southstar Capital Group is a family-owned and operated multifamily real estate investment firm that has been in business for more than 50 years.
Hines is a privately owned global real estate investment, development and management firm with 108 developments underway and a portfolio of 506 properties, representing more than 210 million square feet. Its global headquarters is in Houston.