Legal battle erupts over BH3’s public-private Delray Beach project inside Opportunity Zone

BH3 co-founders Daniel Lebensohn and Greg Freedman (BH3, iStock)

BH3 co-founders Daniel Lebensohn and Greg Freedman (BH3, iStock)

A public-private partnership between BH3 and the Delray Beach Community Redevelopment Agency to redevelop 6.17 acres of prime downtown land is collapsing over delays and changes to the developer’s original proposal.

Aventura-based BH3, led by principals Dan Lebensohn and Greg Freedman, sued the CRA on Friday for breach of contract, after the agency’s board began the process to scuttle the deal in late January.

“To our surprise, what was supposed to be a procedural vote to grant variances and an amendment for more time to have everything approved, the CRA board reversed course for some reason unknown to us,” Freedman told The Real Deal. “We have been asking for more time since March because of Covid. We have tried to acquiesce and work with them. When they reversed course on us, they left us no choice but to really go on offense.”

Kim Phan, the CRA’s legal advisor, said the agency declined comment, citing the pending lawsuit.

Adam Frankel, a Delray commissioner who serves as CRA vice-chairman, disputed Freedman’s characterizations. “From my perspective, BH3 promised a project that would be a true destination on West Atlantic Avenue,” Frankel said. “They sought to change that original project in a vast and material way. The fact is that BH3 has done minimal to no work in starting construction of this project, which has been a very large disappointment to all of us here in the city of Delray Beach.”

The site is within an Opportunity Zone on the 600 to 800 block of West Atlantic Avenue, where BH3 had proposed AltaWest. It would have entailed 43,000 square feet of ground-floor retail, 21,600 square feet of professional office space, a 33,000-square-foot grocery store, 165 residential units totaling 272,242 square feet, 744 parking spaces, about 45,000 square feet of public space called “Frog Alley” and up to 30 workforce housing units, the latter of which included 18 affordable housing units recently completed on an adjacent site.

Since the CRA approved a sale and purchase agreement with BH3 in April 2019, the project has changed substantially.

It is now called Fabrick, and the number of residential units were reduced to 65 apartments and four townhouses, all of which would be workforce and affordable housing, according to Freedman and documents submitted to the CRA. In addition, BH3 wants to reduce the square footage of the retail and green space, as well as build a surface parking lot instead of placing a parking structure on top of the grocery store.

According to the complaint, BH3 spent more than a year searching and holding discussions with potential grocery tenants, and signed a “non-binding, but heavily negotiated” letter of intent on Oct. 12 with a national chain. Freedman said the company is Publix.

BH3 claims that the pandemic prolonged the negotiations and responses to design and tenant requirements, because Publix was dealing with issues pertaining to its supply chain, logistics, employee health and other related factors, and the ongoing, general state of emergency.

The project’s design was revised to further reduce density and intensity after BH3 conducted outreach efforts with Delray Beach residents, who were “clearly not desirous of BH3 or any
developer gentrifying the neighborhood with a monstrous project that had market rate housing,” according to the lawsuit. Publix also required that BH3 build a surface parking lot instead of a garage.

Amid all this, BH3 faced a Jan. 18 deadline to have its site plan approved or be considered in default. So the developer sought approval to negotiate an extension and for the design changes, which the CRA board initially accepted at its Dec. 17 meeting in a 5-2 vote, the lawsuit states.

But at its Jan. 26 meeting, the CRA rejected project variances and the extension, despite BH3 offering to compensate the city by increasing its $250,000 deposit to $1 million and to pay $200,000 to the city’s parking trust fund, according to the complaint.

The lawsuit and Freedman contend the CRA should have granted the extension due to delays caused by Covid-19 and not the developer. “At the end of the day we wish we weren’t here,” Freedman said. “We think they have erred in their judgment. We look forward to that being corrected. We want to charge forward with this project.”

Frankel said the CRA went above and beyond in trying to work with BH3 to start construction. “The fact is that BH3 is trying to use Covid as an excuse, and I find that to have little to no merit,” Frankel said. “BH3 has done nothing to try and salvage this as of this time.”

Born to serve: Springsteen drummer Max Weinberg joins Delray planning and zoning board

Max Weinberg and Delray Beach (Credit: Sergione Infuso/Corbis via Getty Images)

Max Weinberg and Delray Beach (Credit: Sergione Infuso/Corbis via Getty Images)

Bruce Springsteen’s drummer Max Weinberg is getting into civil service.

Weinberg, a property owner and resident of Palm Beach County, was appointed to a two-year term on the Delray Beach Planning and Zoning Board this week.

Weinberg told The Real Deal that he’s been interested in real estate since he was a “very young man,” and that he has built and renovated a number of homes in different states. He wrote in his application that he’s appeared before planning and zoning boards in New Jersey, Arizona, New York and Los Angeles.

Commissioner Juli Casale nominated Weinberg. The Delray Beach City Commission unanimously voted to appoint Weinberg to the board on Tuesday, as first reported by the Palm Beach Post.

“I’ve always had a deep interest in how towns, municipalities, and cities work,” Weinberg told TRD. “Southeast Florida is my permanent home and I thought it was a way to be able to serve the community.”

Weinberg, the longtime drummer for Springsteen’s E Street Band, was the bandleader for Conan O’Brien on “Late Night with Conan O’Brien” and “The Tonight Show with Conan O’Brien.” He listed the positions on his application with the city of Delray Beach.

Over the years, Weinberg has bought and sold a number of properties in Palm Beach County.

He currently owns two properties in Delray Beach, according to his application. His home on Seaspray Avenue in Delray is on the market for $5.25 million. The sale is pending, according to Realtor.com.

Two years ago, Weinberg and his wife, Becky, sold a 6,500-square-foot house at 110 Wells Road in Palm Beach for $6.78 million.

Write to Katherine Kallergis at [email protected]

Crestron CEO to pay $7.6M for Delray Beach condo

Randy Klein and Ocean Delray (Credit: LinkedIn)

Randy Klein and Ocean Delray (Credit: LinkedIn)

The CEO of Crestron, the automation company that makes everything from smart lighting controls to audio and video technology and motorized shades, is buying a luxury condo in Delray Beach.

Randy Klein, president and CEO of Crestron Electronics, is under contract to pay $7.6 million for a unit at Ocean Delray, a boutique condo project under construction. When it closes, the sale is expected to mark a record for Delray Beach at more than $2,000 per square foot, according to a press release. The deal went under contract in April, during the pandemic.

National Realty Investment Advisors and U.S. Construction are developing the 19-unit building at 1901 South Ocean Boulevard. Units range from 3,373 square feet to more than 4,400 square feet, with three to five bedrooms each, and terraces ranging from 682 square feet to more than 2,600 square feet.

Klein’s unit will have 3,721 square feet of indoor space with a 682-square-foot covered terrace, three bedrooms, a den and five-and-a-half bathrooms. It will also have a three-car air-conditioned garage. He and his wife are based in New York and will use the condo as a second home, according to the release.

The three-story development, to be built on a 1.8-acre property, will feature over 200 feet of ocean frontage, a pool and cabanas. Randall Stofft is the architect.

The Delray Beach City Commission granted final site-plan approval for Ocean Delray last year.

New Jersey-based NRIA acquired the site, previously home to the Wright by the Sea Hotel, in 2018 for $25 million.

IMI Worldwide Properties, the exclusive sales and marketing firm for the project, has presold 45 percent of the units for a total of $53 million. It’s expected to be completed next year.

13th Floor scores $22M loan to redevelop golf course in west Delray Beach

13th Floor closed on the 110-acre property last year for $5.4M

Rendering of Avalon Trails and Mike Nunziata of 13th Floor Homes

Rendering of Avalon Trails and Mike Nunziata of 13th Floor Homes

13th Floor Homes closed on a construction loan for a massive redevelopment of a golf course in west Delray Beach.

Property records show that the homebuilding division of 13th Floor Investments received a $21.9 million loan from CIBC Bank for Avalon Trails, a 55-plus age restricted community planned for the shuttered 18-hole Marina Lakes Golf Course.

About a year ago, Marina Lakes LLC, tied to Peter Vitale, sold the 110-acre property at 4800 Cumberland Drive to 13th Floor for $5.4 million.

In all, Avalon Trails will have about 524 residential units, built next to the Villages of Oriole.

The 13th Floor development will include single-family homes, villas and multifamily units with prices ranging from the $300,000s to $500,000s.

Once it’s completed, Avalon Trails will feature clubhouses, resort-style pools, card rooms, gyms, business centers, game areas, tennis and pickleball courts, bocce ball, landscaped walkways, and lakefront park areas. The developers are also incorporating a 2.4-mile eco-fitness trail.

Zoning allowed for up to 1,200 units to be built, but nearby residents, who OK’d the current plan last year, were opposed to high-density development and wanted the project to be age-restricted. The Village of Orioles, which has 3,742 homes, is also restricted to residents who are at least 55 years old.

A number of developers are buying golf courses to convert them into single-family home communities, including Lennar Corp. and Pulte Group.

Last year, Lennar revealed plans for 415 single-family homes and townhomes on the site of the former Crystal Lake Golf Club, marking the homebuilder’s first master-planned community in Deerfield Beach in more than 25 years.

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PHOTOS: On the scene at Delray Beach home tour

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The Corcoran Group sponsored a home tour of Delray Beach earlier this month.
Corcoran sponsored one of the eight homes on the tour, which benefitted the Achievement Centers for Children and Families. The event took guests into a series of Delray Beach homes and included lunch at the Delray Playhouse.
Agents Gay Bridges, Laura Rodriguez, Susan Long, Jennifer Kilpatrick, Timothy Mandala, Ryan Fulton, Phil Friis, Nolan Pierami, Laurie Dietz, Adrienne Cera, Anne Bennett and John Phanco are all involved in the home tour, according to a press release.
Delray Beach has seen a number of new developments, including hotels and restaurants. Downtown Delray Beach in particular has morphed from blighted slum to night-life hot spot in the last 30 years, but city leaders are still tweaking their formula for success. – Katherine Kallergis and Sean Stewart-Muniz

Source: The Real Deal Miami