Who should be on the hook when a redevelopment project runs wildly over cost projections?
That is the question at the heart of a $50 million lawsuit that pits developer against architect in an over-budget, behind-schedule project to transform a historic landmark into a 21st-century data center in Sioux City, IA.
The case involves the 12-story Badgerow Building, built in 1933.
In its negligence lawsuit, developer Mako One Corp. claims it was misled by M Plus Architects Inc. and owner Dale McKinney about the cost of reinforcing the building's floors, footings and foundations.
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The case involves the 110,000-square-foot Badgerow Building in Sioux City, IA, which was built in 1933 and is listed on the National Register of Historic Places.
Mako One bought the building in 2007 with plans to convert 10 floors into data centers, according to the complaint, which was filed in March.
The Encinitas, CA-based developer hired Sioux City-based M Plus Architects, a firm with more than 20 years of experience, to direct the project.
M Plus and its owner responded to the lawsuit in November with a denial and a countersuit demanding payment of $160,000 in bills.
Claims Against Architect
Mako One said it initially wanted to develop the historic property into a mixed-use facility for commercial, residential and retail tenants, according to court documents.
But, after discovering the property's fiber optic and grid possibilities, Mako One said it explored the possibility of using the site as a data center and consulted the architect. Data centers house computer systems and associated components, such as telecommunications and storage systems.
Relying on floor load limits calculated by McKinney in August 2009 and a cost estimated at “hundreds of thousands of dollars,” Mako One said it decided to develop the data center.
The developer alleges that McKinney said in July 2012 that the load limits were much less than originally estimated and that the project would cost between $3 million to $5 million, including reconfiguring and reinforcing the building's foundation and flooring system.
The architect has denied those allegations.
The developer said it would have not have pursued the data center had it known the true cost of the upgrades. Reports say the company has spent $6 million thus far and is bonded for an additional $6 million.
In addition to the data center projections, Mako One alleges that McKinney “failed in assuring the building’s historic tax and preservation compliance,” resulting in construction delays of more than two years at a cost of $1 million.
For example, Mako One says the architect erred in the assessment and approval of "non-contributing facades" under preservation rules, and it must now replace non-compliant windows, which cost more than $100,000 to buy and install.
In addition, Mako One claims the architect incorrectly completed the state’s historic tax credit application, resulting in additional costs.
The architect also denies those claims.
In a report in the Sioux City Journal Monday (Dec. 2), Bruce DeBolt, of Mako One, said the Badgerow building was “never going to be developed into our original vision.”
Mako One's attorney did not respond last week to a request for comment.
M Plus Architects and McKinney declined comment through their attorney.
About the Building
The 110,000-square-foot terra cotta building is listed on the National Register of Historic Places.
The Badgerow was designed in the Art Deco style by Sioux City-based architect Knute Westerlind (1889-1960); it features a lobby composed of black Belgian marble and pink Tennessee marble with floors of patterned terrazzo. Westerlind also designed the Sioux City auditorium, several churches, and apartment buildings in Sioux City.
The American Institute of Architects-Iowa Chapter has recognized the Badgerow as one of the state's 50 most significant buildings.
Meanwhile, the legal dust-up hasn't stopped the building from landing its first tenant: an IT firm based in the Midwest, news reports said.