Lawsuit filed over delays at former Kaufmann’s

More than three years after striking a deal to build a hotel inside the former Kaufmann’s/ Macy’s department store, the group behind it still hasn’t been able to open its doors.

And AM Pitt Hotel LLC is pinning the blame on Core Realty, the Philadelphia developer behind the redevelopment of the Smithfield Street landmark. It claims that repeated delays in getting the overall project done have left it unable to open the 160-room Even Hotel.

In a recent lawsuit filed in Allegheny County Common Pleas Court, AM Pitt charged that it has

“suffered massive monetary damages as a result of Core’s extreme delay in completing its construction in the base building.”

“Since July of 2017, Core has refused to agree to a date by which all of its work will be completed, leaving AM Pitt — and AM Pitt’s hotel manager — at Core’s mercy,” the lawsuit stated.

Charging breach of contract, AM Pitt is seeking at least $15 million in damages against 400 5th Ave. LP, a Core affiliate, as a result of the delays.

While declining to comment directly on the litigation, Michael Samschick, Core’s president and CEO, said the “hotel has tried to be a good partner and we will continue to work with them to be successful.”

He blamed part of the delays in completing the overall project to not being able to get full electrical power to the building until last June, an issue that led to finger pointing between Core and Duquesne Light.

The lawsuit is the latest development in the saga involving the former department store, which Core purchased for $15 million in 2015 with plans to transform it into a premier mixed-use complex.

But the project, which also is scheduled to include 311 luxury apartments and 130,000 square feet of retail space, has been bogged down by delays, including an electrical vault fire in summer 2016.

The only business that has opened so far is a Waffles, INCaffeinated restaurant in the old Kaufmann’s annex on Fifth Avenue near Cherry Way.

Although AM Pitt in December received a temporary occupancy permit to open the hotel, it still has been unable to do so because Core has not completed work required by IHG Management, the hotel’s operator, according to the lawsuit.

As of Feb. 13, that work included providing a certificate of occupancy for the building and certifications from the state for dedicated elevators; sealing and finishing gaps in window frames, including hotel rooms; repairing and replacing loose railings in stairwells; and fixing slip, trip and fall hazards.

“Although AM Pitt hopes the hotel will be up and operating within the next few months, there is no assurance because Core still has not completed seller’s work,” the lawsuit stated.

Mr. Samschick said most of the items, if not all, have been completed.

Matthew Shollar, an AM Pitt representative, declined to comment on the lawsuit.

As part of its claims, AM Pitt charged that Core’s failure to provide a weathertight and water-tight space on time resulted in “multiple flooding events and leaks,” damaging guest rooms and finishes and infiltrating electrical lines.

It also prompted the growth of mold and fungus. AM Pitt was forced to remediate the issues at its own expense, the lawsuit said.

In all, the delays have forced AM Pitt to pay its contractor, Mascaro Construction, at least $500,000 more to remain on the job. The complaint also charged that there were more than $400,000 in change orders attributable to “negligent actions (and inaction) of Core,” such as repairing water damage caused by the developer.

AM Pitt also maintained that it has been deprived of millions in profit it would have earned had the hotel opened two years ago, as planned. Were it not for the delays, it was prepared to open the hotel on or before Nov. 30, 2017.

Beyond that, the delays nearly caused AM Pitt’s lender to foreclose on a loan when AM Pitt didn’t have the money to make certain interest payments because no revenue was coming in from the hotel, according to the lawsuit. The matter, however, was resolved without a foreclosure.

The lawsuit said AM Pitt gave Core three extensions to finish base building work that included fire and life safety systems; mechanical, electrical, plumbing, and HVAC systems; elevators; building envelope protection; windows; and an atrium.

In each case, Core failed to meet the deadlines included in the extensions. When AM Pitt proposed a fourth extension, Core balked and refused to commit to a date, according to the lawsuit.

Besides the AM Pitt litigation, Core has been hit during the past two years with more than a half dozen mechanic’s liens filed by vendors who hadn’t been paid. Most of those have been satisfied.

Mr. Samschick indicated Tuesday that the project was nearing completion, with amenities being finished and residents starting to move in. He said the building “has been approved for move-in” and that more than 115 apartment leases have been signed.

“We’re glad that this project is finally coming to fruition and the quality of the work and the quality of the tenants are what we hoped for,” he said.