Major Developers Battle in Court Over Miami's Block 55 Project

A long-stalled project with affordable housing in Miami’s neglected Overtown neighborhood hit new hurdles as the current and previous developers sued and countersued each other.

The fight is over Block 55 at 249 NW Sixth St., which most recently was slated for development by Michael Swerdlow with retail and 556 apartments, including 154 for low-income seniors.

Preeminent African American developer R. Donahue Peebles and entrepreneur Barron Channer sued Swerdlow, claiming he and city officials did a backroom deal that took away Peebles’ and Channer’s fairly earned development rights.

Peebles and Channer, who sued through affiliated limited liability companies, are represented by Glen Waldman, partner at Waldman Barnett in Miami.

Swerdlow attorneys Alan Kluger and Steve Silverman say the lawsuit is nothing but a last-minute push to stop Swerdlow, noting the March 26 complaint was filed days before he was due to close on project financing. They said the lender walked away as a result of the suit.

“Literally, literally days before the closing he filed this lawsuit to hold them up,” Kluger said.

Kluger and Silverman, shareholders at Kluger, Kaplan, Silverman, Katzen & Levine in Miami, responded Friday with a counterclaim and motion for declaratory judgment. They said even assuming the developers’ allegations are true, their breach of contract counts are past their filing deadline.

Waldman said the breach of contract claims are well within the 5-year statute of limitations and the suit was not intended to derail Swerdlow’s financing. Peebles and Channer didn’t know Swerdlow was about to close on a loan, Waldman added.

“For anybody to allege that our actions caused a failure to proceed forward is just completely inaccurate. We have not moved to enjoin and will not move to enjoin moving forward with this project that should have been ours,” he said.

The vacant Block 55 between Interstate 95 and the 3 MiamiCentral building is owned by the city through the Miami Southeast Overtown/Park West Community Redevelopment Agency. In 2013, the agency requested development proposals for Block 55 and Block 45 at 152 NW Eighth St.

Peebles and Channer through their OGP won both solicitations with the city selecting them as the top proposers. Swerdlow didn’t submit anything in 2013.

Issues arose because a CRA board member, Miami City Commissioner Keon Hardemon, was pulling the strings behind the scenes to keep out Peebles and Channer, according to the Miami-Dade Circuit Court complaint.

The CRA twice kept its board from considering agenda items and delayed other documents and approvals that would solidify Peebles’ and Channer’s project. In the meantime, a deadline for finalized development agreements was approaching, which if missed would terminate Peebles’ and Channer’s right to build out the properties. They envisioned retail and up to 600 apartment units for Block 55 and a mixed-use project including a hotel for Block 45.

Peebles and Channer, who allege a conspiracy between Swerdlow and Hardemon, say CRA executive director Cornelius Shiver was doing Hardemon’s bidding. They felt pressured to enter a deal with Swerdlow to re-assign to him their Block 55 development rights, according to the complaint.

Peebles and Channer, through their OGP, in January 2016 entered a membership interest purchase and sale agreement with Swerdlow and his Downtown Retail Associates LLC. Under the agreement, Swerdlow was to pay $15 million for Blocks 45 and 55.

The agreement included confidentiality and noncircumvention provisions for Swerdlow.

The Peebles-Channer suit includes two breach of contract claims alleging he broke both. Swerdlow communicated with the CRA about his deal with Peebles and Channer. When the CRA terminated OGP’s rights to Block 55 and reissued a solicitation, the complaint said Swerdlow put in a proposal . He was awarded the project.

Kluger and Silverman, Swerdlow’s attorneys, denied any backroom deals and said the issue came down to Peebles failing to meet CRA requirements. Hardemon and Shiver also denied there were any secret deals.

Peebles “got the project and he was the No. 1 bidder. Peebles had certain deliverables, and he did none of them. Unrelated to us at all, the CRA terminated him. They sent him a letter, we had noting to do with that, they canceled his bid and then did a new RFP for Block 55,” Kluger said. “Swerdlow submitted a proposal for a mixed-use project for $350 million retail-apartment complex. It’s a beautiful project.”

Hardemon, his lobbyist-uncle Billy Hardemon and Shiver aren’t defendants in the Peebles-Channer suit, but the complaint indicates this could change.

The CRA has partnered with many developers to produce thousands of Overtown apartments at market and affordable rents, Hardemon said.

“It seems that this developer failed to produce and wishes to place the blame elsewhere,” he added. “I had no role whatsoever in the demise of their development plan.”

Shiver said Peebles and Channer defaulted on their development agreement for Block 45 to get their deposit back and never acquired development rights for Block 55.

“Whether or not this lawsuit is baseless in facts or the law surely will be determined at a later date, but for now everything is on hold,” Shiver said. “The unintended victims are the residents of the Overtown and Park West Redevelopment Area.”

Both sides agree the historically black Overtown neighborhood needs economic revitalization and affordable housing.

“We feel terrible that as a result of the things we alleged in our complaint the people of Overtown have lost out,” Waldman said, adding his clients would have finished the project if it weren’t for CRA delays.

The reality is that it’s Peebles and Channer who are hurting Overtown by derailing Swerdlow’s financing for the project, Kluger countered.

“We are going to develop this project,” he said. “The city is behind us. It’s a substandard, vacant, underused area.”

Peebles gained fame as a developer in the District of Columbia. In South Florida, he developed the Royal Palm Crowne Plaza Resort, the first major Miami Beach hotel developed and owned by an African American. Also in Miami Beach, he developed The Lincoln office building and The Residences at The Bath Club luxury condominiums.