Swinerton strikes back at Sacramento Kings in court

UPDATE: Aug 6, 2018: Swinerton Builders on July 27, 2018 filed a cross-complaint against SG Downtown, a partnership between the Sacramento Kings and JMA Ventures, alleging that it owes the company and its subcontractors $27.5 million, according to the The Sacramento Bee. The lawsuit claims that mismanagement led to budget overruns and chaos.

Eric Foster, Swinerton president and CEO, said his company tried to work with SG Downtown under conditions — leadership, vision and scope — that have constantly evolved since the project began, but that the owners were "in denial." As a result, Swinerton said that costs have risen almost $50 million.

Swinerton alleged in its filing that SG Downtown provided incomplete drawings, did not cooperate in cost-cutting efforts and asked some subcontractors to knock 10% off their contract amounts.

In response to Swinerton's lawsuit, Todd Chapman, president of JMA, said contractual disputes are not unusual on a large project and that "we need to ensure the resolution of all remaining disputes with subcontractors for work on the project and that the subcontractors are fairly paid.”

Dive Brief:

The Sacramento Kings' development group, SG Downtown LLC, filed a lawsuit in Sacramento Superior Court on July 3 against Swinerton Builders, the general contractor for the team's 16-story downtown Sacramento hotel and condo tower, alleging breach of contract. SG claims, according to The Sacramento Bee, that Swinerton's mismanagement of the project, which has been under construction for three years, has led to more than $50 million in cost overruns and is seeking $36.4 million in damages and lost income.
SG alleges that Swinerton agreed to cap the project price at approximately $148 million but has now estimated the cost at $198 million and says there was no maximum-price agreement between the parties. In addition to the cost overruns, SG, which also includes JMA Ventures of San Francisco, claims that Swinerton did not deliver the 250-room hotel portion of the project in time to host NCAA tournament games in March 2017 and that condo construction is still ongoing. The hotel opened in October 2017 as did the project's nightclub. The building also has office space, and the Kings have moved their operations to the building's fourth floor.
Swinerton filed a $36 million mechanics lien on the property this past February, claiming SG owes them that much in back payments. Since last summer, some subcontractors have also complained of late payments and filed mechanics liens on the project.

Dive Insight:

The Kings' Golden 1 Center, the anchor of the team's downtown development, also experienced cost overruns. The arena came in at about $558 million, $80 million more than first estimated. The city of Sacramento agreed to put $255 million into the project, but the burden of those cost overruns was the team's responsibility. The team said the additional costs were for a $30 million practice facility and other changes, which included a redesign of the bowl area to bring fans closer to the action during games.

Like some other major professional sports teams, the Kings decided to take advantage of the draw of their brand new, high-profile stadium by surrounding it with a mixed-use development. There are similar plans in the works for the 25-acres surrounding the $250 million Allianz Field soccer stadium, future home of Minnesota United FC. Mortenson Construction will develop 1 million square feet of office space; 421,000 square feet of retail and entertainment space, which includes a movie theater, health club and bowling alley; 620 residences; 400 hotel rooms and more than 4 acres of open spaces with the 20,000-seat stadium as the centerpiece. Mortenson is currently underway with the construction of Allianz Field.