Market Overview

Hines Real Estate Sued by Southstar Capital Group over Alleged Defective Construction of Florida Apartment Complex


A Florida-based owner of multifamily communities is suing Hines, a
global real estate developer, for allegedly failing to make necessary
repairs to a luxury apartment complex that was so riddled with
construction defects that it was condemned, and its residents were
forced to evacuate.

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Southstar Capital Group is suing Hines real estate over defective construction of this now condemned ...

Southstar Capital Group is suing Hines real estate over defective construction of this now condemned apartment complex in Celebration, Fla. (Photo: Business Wire)

Southstar Capital Group filed suit against Hines over its alleged
failure to disclose extensive hidden defects when selling the 306-unit
apartment complex to Southstar for $67 million. The complex was
developed and constructed by Hines and is located outside of Orlando in
Celebration, a master-planned community near Walt Disney World that was
developed by Disney.

The lawsuit accuses Hines and its affiliates of knowingly withholding,
concealing and misrepresenting defective conditions at Aviva at
Celebration apartments, now Sola at Celebration. Southstar purchased the
newly built property from Hines in September 2016.

"Hines knew from the beginning that this property was fraught with
construction defects and structural issues yet went ahead and sold us
the complex for market price,'' said Gina Williams, president and chief
financial officer of Southstar Capital Group. "Hines needs to resolve
this now before the property falls into further disrepair and the damage
becomes even more costly.''

The defects were not detected during the normal inspection process and
only became apparent when the walls, breezeways, floors and balconies
started to crack and deflect after Hines sold the complex. Subsequent
inspections, which included removing layers of the walls and floors,
revealed significant construction defects that violated local building
codes. As a result, county officials ordered all residents to evacuate
in August 2017, leaving Southstar with no rental income from the
property for the past year.

Hines, through one of its wholly-owned affiliates, Urban Oaks Builders,
the general contractor on the project, signed a contract to make repairs
to the property, but as more hidden defects came to light, Southstar
says they refused to continue the work. Based on Hines' and its
affiliate's alleged unwillingness to make the property habitable again
and restore it to its original value, Southstar had no other option than
to file a lawsuit. Recently, Southstar put the property up for sale.
Southstar owns and operates properties in Florida and Texas but is not a
developer or construction contractor.

"Having this once beautiful property sit and rot serves no one's
interests. Every day that goes by, the water and mold damage in the
buildings is getting worse,'' Williams said. "For a global developer
like Hines to simply walk away from a community is irresponsible and

Headquartered in Boca Raton, Fla., Southstar Capital Group is a
family-owned and operated multifamily real estate investment firm that
has been in business for more than 50 years.

Hines is a privately owned global real estate investment, development
and management firm with 108 developments underway and a portfolio of
506 properties, representing more than 210 million square feet. Its
global headquarters is in Houston.

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