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Builder files $25 million lawsuit against Kings partnership on downtown tower project

A new lawsuit has accused the Sacramento Kings and its development partners of mismanaging their 16-story hotel and condo project downtown, leading to construction confusion, massive budget overruns and tens of millions of dollars in still-unpaid bills.

Swinerton Builders, the San Francisco-based general contractor hired in 2014 to build the tower, says the Kings and their partners, JMA Ventures, owe them and subcontractors $25.7 million, according to a suit filed Friday in Sacramento Superior Court.

The suit contends the problems stemmed from “radical” changes the owners called for at the last minute to turn an ordinary hotel tower into a sculptural showpiece but failed to come to grips with the costs of doing so.

In a statement issued Monday, Eric Foster, Swinerton president and chief operating officer, accused the ownership group of being in denial for years about the project’s cost realities.

“From the beginning, ownership mismanaged the project, with continual changes in leadership, vision and scope,” Foster wrote. “We intervened early and often about the cost impacts of the dramatically changing project, but ownership was in denial.

“We have been forced to take the necessary legal action to ensure our subcontractors and our company get paid for the work completed.”

The tower, which sits at 5th and J streets, adjacent to the Golden 1 Center arena, is a joint partnership of the Kings and San Francisco-based JMA Ventures. Their partnership goes by the name SG Downtown LLC.

In its court filing, Swinerton said the project cost, originally sketched out at $148 million, now has hit $196 million.

The 250-room Kimpton Sawyer hotel opened in the tower last fall, and a restaurant, store, entertainment venue and nightclub also are open in the building. But not all of the 45 condominium units have been finished, according to recent reports from the Kings.

The Swinerton suit is a response to a lawsuit the Kings and JMA Ventures filed as SG Downtown on July 3 against Swinerton.

In that suit, the ownership group claimed Swinerton had mismanaged the project by coming up with surprise cost increases, missing its deadline and ultimately causing the Kings and JMA Ventures $36 million in damages and lost income.

Swinerton, in its counter, said the owners provided incomplete drawings at times and failed to make good on efforts to lower costs when it became clear the project was headed over budget.

The Swinerton countersuit also reveals some of the behind-the-scenes drama that took place around contractor payments.

To cut costs, the ownership group asked an undisclosed number of subcontractors last year to accept a 10 percent cut in what they believed they were owed, according to Swinerton, which oversaw those subcontractors.

Some accepted, but others balked and instead filed liens against the project property for unpaid work. Swinerton also filed a lien of $36 million against the Kings and JMA Ventures in March for unpaid bills on behalf of itself and subcontractors.

The Kings subsequently released $10 million to Swinerton to pay some subcontractors, Swinerton said.

According to Swinerton, the ownership group paid one of those subcontractors only after she sent an “impassioned” letter to Kings’ owner Vivek Ranadive saying that SG Downtown’s failure to pay her company was driving it to bankruptcy and jeopardizing 125 local jobs.

Swinerton also accused the ownership group of misleading them earlier this month.

Swinerton said it had planned to file a lawsuit to back up its lien claim but agreed to SG Downtown’s request to hold off until the two sides could meet one more time in July. Seven days before that meeting, however, that group filed its suit against Swinerton.

Todd Chapman, president of JMA Ventures, issued an emailed statement in response to the Swinerton filing: “We have a contractual dispute with Swinerton, which is not uncommon on a job of this size. We need to ensure the resolution of all remaining disputes with subcontractors for work on the project and that the subcontractors are fairly paid.”

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