Press Release: 11/17/2023

Contrarian Boston 11/17/2023

 

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A sign of tougher times or just a tough industry? Contractors, developers and unions haggle in court over missed payments as real estate market sinks

Yes, the days may be numbered for Boston’s epic building boom. But construction can also be a really brutal industry.

Even in the best of times, general contractors can be grudging, to put it nicely, when it comes to paying their subcontractors, with an advantage to be gained by hanging onto money as long as possible.

And both factors - the construction slowdown and sharp-edged business tactics - are likely at play as a growing number of contractors across the Boston area default on payments to union health and pension funds. 

Unions representing electricians, carpenters and cement workers have taken contractors to state and federal court in recent weeks, according to records reviewed by Contrarian Boston.

In some cases, union officials are seeking hundreds of thousands of dollars that they contend contractors should have paid into union benefit funds on behalf of the workers toiling on their projects. 

In addition, there are a growing number of cases in which developers, contractors and subcontractors are squaring off with each other in court over missed payments for work on projects - another sign that cash flow issues may be mounting as new construction work begins to dry up, industry executives say.

Photo by Danist Soh on Unsplash

At the center of a number of cases is RISE Construction. The Boston-based contractor, launched by hard-charging former Suffolk Construction veteran Jim Grossman and financier Brian Anderson, has become a major player in the local market since bursting upon the scene a few years ago.

IBEW Local 103, which represents thousands of union electricians, went to state court earlier this month to recover from hundreds of thousands of dollars from RISE that it contends the general contractor owes to union benefit funds.

The missed payments were for work done by union electricians on eight different Boston area projects, including a 34-unit luxury apartment building at 249 Corey Road in Brighton, The Ellery project in West Roxbury, and the Indie, a 149-unit building under construction in Allston, among others, according to court documents.

Rendering of The Ellery in West Roxbury

RISE, a general contractor, would not ordinarily be on the hook for the union fringe benefit payments, but stepped in after one of its electrical subcontractors, Coastal Electric, failed to make those payments.

But as they say, that may be only half the story. For Coastal, in turn, has filed its own claim against RISE, arguing it is still owed hundreds of thousands of dollars money for the electrical work it did on various new apartment and condo projects in Boston.

RISE has since stopped work on one Boston project, with the contractor and the developer having parted ways. And RISE is also involved in litigation with four other former subcontractors, who also claim they are owed money.

While Boston has long been a darling of real estate investors, the flow of money into projects has slowed dramatically over the past year. Suddenly skittish bankers are putting pressure on developers, who in turn are putting the squeeze on the general contractors, in a chain reaction that trickles down to subcontractors and their workers and equipment suppliers.

“The marketplace is slowing down from a construction standpoint,” said one veteran construction executive. “When the spigot shuts off … it’s a shock to the system.”

Still, RISE is hardly the only contractor buffeted by turbulence from a slowing construction and real estate market.

New housing starts in Boston having plunged over the last year, while lab and office construction has also fallen sharply.

“It’s getting squirrely out there,” noted one local electrical contractor of the deterioration in the construction and real estate markets.

Just take Dominion Concrete, which has done work on the HYM Investment Group’s ambitious redevelopment of the old Suffolk Downs racetrack.

The local concrete subcontractor is suing the developer of the Harper apartment complex in Brighton, arguing in federal court that it is still owed more than $2 million for its work.

And the general contractor on the project, Quarterra, is suing Dominion back. Quarterra contends it terminated the subcontractor after the firm fell behind on its work on the Harper, a charge Dominion vigorously rejects.

Meanwhile, the Boston Plasters and Cement Masons Union has taken Dominion and Greystar Development to court. Local 534 contends the developer and its contractor have failed to make tens of thousands in union benefit fund payments on a pair of Everett projects.

When everyone and his brother is suing each other over missed payments, you know the boom times have officially come to an end.

Big Dig II? T says it will take $24.5 billion to repair nation’s worst rapid transit system

Oh yeah, and that’s not including new projects like electrifying the commuter rail.

That’s also more than double the $10 billion the MBTA estimated back in 2019 that it would take to repair the battered system, the Globe reports.

That’s also more than the Big Dig with its eye-popping $24.3 billion price tag, or, for that matter, the Channel Tunnel connecting the U.K. with France, which cost $21 billion to build.

The Zakim Bridge: One of the better things to come out of the Big Dig

In this case, we would not be getting a marvel of engineering, but rather a subway system that isn’t plagued by chronic delays, breakdowns and trains catching on fire or other scary things.

All snark aside, the new General Manager Phillip Eng appears to be attempting something very new for the T - brutal honesty.

“This is the honest assessment we’ve been waiting for, thanks to GM Eng for the transparency he's brought to the,” US Rep. Seth Moulton tweeted.

We have had happy talk galore from T chiefs and governors over the decades that the system is just one fix or two way from being functional.

And look where that got us.