Feb. 19, 2003 – The Housing Authority's executive director has canceled a $6 million contract with the company hired a year and a half ago to oversee two major affordable housing developments — revitalization of the Louis E. Brown Villas on St. Croix and the construction of a new Estate Hoffman/Nullyberg community on St. Thomas.
But the developer, Smart Inc., has already been paid almost $1 million, yet did not lay "one block" at either site, VIHA's Ray Fonseca said in a release Wednesday.
Fonseca said he terminated the contract for four reasons:
– Smart Inc. missed major "milestones" laid out in the agreement, such that "the contract could not be completed anytime close to the original completion date." It failed to meet the dates for closing on financing, for 90 percent construction completion, and for issuance of a Certificate of Occupancy, he said.
– Final completion costs were being projected at about $5 million more than initially estimated.
– The Housing Authority itself "has the technical capabilities with existing staff to move this project forward."
– VIHA "was taking all the risks involved, and the contractor could not produce the financing needed."
Fonseca said is it his view "that this development consultant was overpaid, and the VIHA shall be seeking reimbursement of all overpayments."
He said the Housing Authority is involved "in several initiatives" to begin demolishing the remaining Louis E. Brown structures and start work at Hoffman/Nullyberg. He said he remains committed to seeing the projects through "even if VIHA has to complete these developments in phases."
The Developer Consultant Agreement entered into effective Aug. 2, 2001, describes Smart Inc. as a corporation licensed to do business in the Virgin Islands with offices in Tillett Gardens. Smart was selected through a competitive bidding process based on a Request for Proposals to assist VIHA in the development, marketing, sale and management of the two redevelopments.
According to the contract-termination notification letter Fonseca sent the company on Jan. 7, 2003, the chief executive officer of Smart Inc. is C. Knox LaSister III.
In that letter, Fonseca stated that "no actual clearing, grubbing, demolition or construction has yet begun."
The contracted administrative/developer fee was $3 million for each of the two housing developments, calculated at 10 percent of the total project costs.
According to documentation from Fonseca, Smart Inc. was paid $435,502.90 between Oct. 15, 2001, and Sept. 6, 2002, toward the Louis E. Brown development and $554,063.87 between Sept. 26, 2001, and Sept. 6, 2002, toward the Estate Hoffman/Nullyberg development.
The agreement provided for 65 percent of the contracted fee for each of the two projects to be paid in monthly drawdowns, and 35 percent to be paid in four equal "success milestone" performance payments at the closing of financing, at 90 percent construction completion, at issuance of Certificates of Occupancy, and at 90 percent occupancy.
Smart stated in documents provided by Fonseca on Wednesday that "we will move our projects on time and on budget to meet the performance milestones, and will accept our compensation accordingly."
Last May, then-acting VIHA executive director Al Simmonds described construction of the mixed-income community in the Estate Hoffman/Nullyberg area south of Weymouth Rhymer Highway to a Senate committee meeting on St. Thomas as "the first major development of this magnitude in more than 30 years." Plans called for construction of 109 multi-family and 67 single-family units of one to four bedrooms, plus a community center. All would be rental units, but there would be a lease-purchase program for the single-family units.
Simmonds said the project, estimated at $35 million, was being financed in part with a portion of a federal Housing and Urban Development grant for housing to replace the Warren E. Brown housing units overlooking Lovers' Lane in downtown Charlotte Amalie that were razed after Hurricane Marilyn destroyed them in 1995. He said construction was to begin in July 2002 and be completed by June 2004.
The day after that, at a similar committee hearing on St. Croix, senators were told about the VIHA venture on that island to revitalize 194 units in the Louis E. Brown Villas. Simmonds said the complex had been ravaged by Hurricanes Hugo (1989), Marilyn (1995), Georges (1998) and Lenny (1999). In 2001, after some buildings had stood as vacant shells for a dozen years, 17 two-story and three-story apartment buildings were demolished. An application was pending to raze two more, Simmonds said.
The senators were told that the goal for the site was to change the overall ambience, fostering a strong sense of community pride, and that the total construction cost was estimated at $29.3 million. Simmonds said the new Louis E. Brown homes would sell for $90,000 to $125,000, with work to start in January 2003 and be completed by December 2005.
For background on the Hoffman/Nullyberg project, see "Affordable housing projects get panel's OK".
For background on the Louis E. Brown Villas project, see the St. Croix Source report "Affordable housing expansion well received".
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