New suit filed against Bluffwalk Center’s developers

By Bryan Gentry

Published: June 6, 2008

An interior design firm that helped Bluffwalk Center in downtown Lynchburg is suing the hotel project’s developers.

Texas-based Lee Collections claims the developers owe them $83,500 for services, products and interest.

But Hal Craddock, managing partner in the Bluffwalk project, said Friday that some of those charges result from inflated shipping sales tax and other charges.

“Out of the literally hundreds of vendors and suppliers that we worked with over the past five years … every single one has treated us fairly and consistently with the exception of Lee Collections,” Craddock said.

Lynchburg lawyer Henry Devening filed suit for Lee Collections on May 30 in Lynchburg Circuit Court.

“I frankly am hopeful that Bluffwalk will survive and do well, but they’ve left us no choice,” Devening said.

According to the lawsuit, the developers contacted Lee Collections in December 2006.

They asked the company to help design and buy interior furnishings, “including window treatments, furniture and related accessories,” the suit says.

The contract was verbal, but the parties never put the agreement in writing, Devening said.

The total cost of Lee Collections’ work — including a $24,000 design fee, furniture costs, shipping charges, and sales tax — was $153,782.

Craddock said the Bluffwalk developers noticed the shipping cost charged by Lee Collections was more than the actual costs reported by the shipping company.

After scrutinizing other charges, they found markup in sales tax charges and in the charges for the furniture itself.

“That’s the reason we haven’t paid them,” Craddock said.

According to the suit, the developers have paid $18,000 of the design fee and $79,632.75 toward other costs.

Lee Collections is asking for the remaining $74,150 plus $9,400 to cover paying its suppliers for the hotel’s furniture.

Craddock said the developers have documented their concerns in writing to Lee Collections, and have made an offer to pay what they think is fair.

“We’re prepared to defend it,” he said. “We think we’ll be successful.”

The Craddock-Terry Hotel and Event Center consists of two renovated buildings in downtown Lynchburg. The center opened in September with more than $1 million of public money involved.

That included loans of about $500,000 from the city and its Industrial Development Authority and an $800,000 federal grant given several years ago.

Also, the city had backed a $3.2 million Housing and Urban Development loan in 2002, agreeing to make payments if the developers fell through.

That happened last summer, when the city had to make a $158,000 payment before the hotel opened.

In February and April 2008, the project’s general contractor, English Construction, and the bank, Wachovia, filed suit for a combined total of nearly $1 million they had not been paid.

Craddock said then that he was working to settle those debts by increasing the hotel’s occupancy rate, asking Wachovia to sell more of the project’s historic tax credits and applying for state Enterprise Zone tax credits.

The occupancy rate has increased — Craddock said the hotel was at 100 percent occupancy three days this week.

Craddock said he recently heard from a Wachovia official who had an idea for a solution that just needs time, he said.

Resolving the Wachovia debt is essential to the developers’ ability to make the next Housing and Urban Development loan payment in August.

Lynchburg city has set aside $325,000 in Community Development Block Grant money in case the tab falls on the city this summer.