J.E. Dunn Pulls Out of West Edge Project

J.E. Dunn Pulls Out of West Edge Project

The festering dispute over The West Edge development has blown up, with J.E. Dunn Construction Co. quitting advertising magnate Bob Bernstein’s trophy project going up by the Country Club Plaza. J.E. Dunn crews have removed their equipment from the $130 million mixed-use complex being built at 48th Street and Belleview Avenue. Trilogy Development Co., the subsidiary established by Bernstein to develop the office, hotel and retail project, is seeking a new builder.

“Trilogy will complete the project with someone new as general contractor,” Trilogy attorney Dave Domina said Wednesday. Even in ending their stormy relationship, neither side could agree on who did what to whom.

“There is a dispute between who quit or was fired,” Domina said. “There have been recurrent and frequent disagreements over this project between the owner and general contractor.”

Dirk Schafer, project executive for J.E. Dunn, said his company pulled out after Trilogy refused to make monthly payments dating to June, totaling more than $10 million. “It’s nonpayment to J.E. Dunn and its subcontractors that got us to where we are today,” Schafer said. “I think it’s regrettable it came to this point. It’s a landmark project that we were proud to be part of.”

The divorce between Kansas City’s largest construction company and Bernstein, the founder of Bernstein-Rein advertising agency, caps a lengthy period of acrimony that became public in June 2007. That’s when J.E. Dunn filed a lawsuit claiming construction costs had risen considerably because of substantial architectural changes to the project. Trilogy countered that the design changes had been minor and demanded that J.E. Dunn complete the work at the $85.7 million construction budget agreed upon when it won the contract in 2005. Moshe Safdie, a world-renowned architect, designed West Edge, which is to serve in part as a new headquarters for Bernstein-Rein.

The dispute went private when both sides submitted the matter to arbitration, but they remained $30 million apart. It erupted again publicly last week when J.E. Dunn stopped construction, saying it had not been paid. Trilogy countered, saying J.E. Dunn had failed to pay its subcontractors. On Monday, J.E. Dunn decided it was time to move on, Schafer said, making the West Edge the first project the company has not completed in its long history.

“If payments had been made, there would have been an opportunity to avoid terminating the contract,” Schafer said.

For Bernstein, J.E. Dunn’s departure will allow him to move on. “My intention has always been to get this built,” he said. “It’s still my intent, dream and desire to finish this as quickly as we can with no further delays. We’re still in litigation and arbitration, but that won’t hinder the development of the project any more.”

Still, construction industry professionals anticipate that it will take at least 30 to 60 days before construction can resume, even if Trilogy achieves its goal of selecting a new contractor by next week. McCownGordon Construction is one of several companies planning to pursue the project. Pat McCown said his firm has had the interior finishing contract for the office building component since January. “What we see is those subcontractors are going to need to get paid for them to get re-engaged with the project,” he said. “That’s the first order of business for Trilogy.”

Then there’s the matter of financing. With costs going up, regardless of how the arbitration turns out, the project is costing much more than originally anticipated. This at a time when credit has become far tighter than when work started three years ago. An attempt to reach BB Syndication Services Inc., of Madison, Wis., the institution that arranged financing for the West Edge, was unsuccessful. Bernstein acknowledged the delays in the project — it was originally slated to be completed in spring 2008 — have been costly, but declined to offer a figure. “The date has changed so many times it’s very frustrating,” he said. “One of the things is we’ll have a firm date with a new contractor and a firm price."

“Yes, it’s expensive to be delayed. There’s a lot of expenses with no income. The longer it goes, the more expensive it becomes.” Bernstein said the problems with the development have not spilled into his other companies, which include Beauty Brands, as well as the advertising agency. “It’s a separate entity, but it’s a challenge,” he said. Highwoods Properties, Bernstein-Rein’s landlord at the Plaza West office tower, has extended the company’s lease once and will likely need to extend it again. The earliest the new building could be ready is spring 2009.

“Highwoods has been cooperative,” Bernstein said.

While his company is seeking the new business, McCown said he regrets the circumstances. “These are two primary players in our community, Bob Bernstein and Bill Dunn (chairman emeritus of J.E. Dunn),” he said. “To see them square off is not good for the city.”

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