A multimillion-dollar hotel construction project in downtown St. Paul, Minnesota, faced multiple unpaid construction work claims totaling $4.4 million after the project was destroyed in a massive fire — one that federal investigators have determined to be arson.
The hotel project, managed by Bloomington-based Kaeding Development Group, was a planned five-story, 120-unit hotel to be branded as Courtyard by Marriott. The hotel was on track to open in spring 2021, until the structure was destroyed in a fire on August 4, 2020.
According to the Ramsey County clerk’s office, 10 mechanics liens — filed by general contractor Doran Companies and nine subcontractors — were placed on the project between November 5 and December 3, 2020.
As of February 12, 2021, eight of the 10 liens have been released, but two — inlcuding the largest lien, valued at $2.5 million — still remain active.
Mechanics liens are a tool used by contractors, material suppliers, and equipment lessors who have not received timely payment for their work. A lien works as a debt-recovery tool by attaching itself to the property and hindering the property owner from selling or refinancing until the unpaid claim has been satisfied.
According to a report from Minnesota Public Radio, the site of the hotel project “has been long considered one of the city’s prime redevelopment opportunities, and was even pitched as the site for a new Twins stadium years ago by then-Mayor Randy Kelly…but the lot has taken decades to find a suitable project.”
The federal Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) — in conjunction with the St. Paul Fire Department, St. Paul Police Department, and Minnesota state fire marshal’s division — stated in an August 2020 news release that after investigating the scene, interviewing witnesses, and reviewing video footage, they concluded the fire was “intentionally set.”
Firefighters who responded to the initial scene reported that not only were the flames severe enough to cause the hotel structure to collapse, but the fire was hot enough to melt plastic on nearby stoplights, and debris from the blaze was found miles away.
In a statement, Doran CEO Anne Behrendt said company officials are “extremely disappointed” to learn that the fire was determined to be arson.
“This destructive act is a considerable setback to a project that was moving the economy forward and supporting construction workers during this time of economic uncertainty,” Behrendt said.
In a February 2021 report, project developer Carl Kaeding insisted the hotel will be rebuilt. Kaeding told the Twin Cities Pioneer Press said he “continues to look for answers” about why someone would have set the Seven Corners Gateway development project ablaze.
“I wish we knew more, but I’m sure everybody wishes they did,” Kaeding commented. “I’d like to know what the reasoning for it was, if there was a reason.”
As of the time of reporting, the case surrounding the fire remains unsolved.
Investigators plan to pursue the case “as long as possible to bring it to a successful conclusion,” said Special Agent in Charge Terry Henderson of the St. Paul field division of ATF.
Destroyed hotel project still faces over $2.5M in active lien claims
By the end of 2020, The St. Paul project faced 10 liens from general contractor Doran Companies and nine other subcontractors, totalling $4,441,028.20.
As of the time of reporting, eight of the 10 liens have been released. The two active liens include a lien of $2,520,518.76 — placed by Doran against project owner Saint Paul QOZ Hotel, LLC — and a lien valued at $98,995.83, which was placed against Doran by subcontractor Braxton and Sons, Inc. The two currently active liens were placed on November 24 and December 12, 2020, respectively.
The eight additional liens — which totaled just over $1.8 million — were all placed by subcontractors against the GC for a variety of materials, services, and labor furnished on the hotel project site between November 2019 through the time of the project’s destruction.
Generally, liens are released or “canceled” after the debt involved has been satisfied.
All 10 liens were filed pursuant to Minnesota mechanics lien statutes.
Construction site fires create contractor payment risk
The St. Paul hotel project is not the first site faced with payment disputes following massive fire damage.
A 2019 property fire at an existing Durcon industrial plant resulted in three liens valued at $8.9 million — owed to contractors for repairs done at the facility after the fire took place.
In January 2020, two under-construction apartment buildings in New Jersey faced $1.7 million in liens after being partially destroyed in a seven-alarm arson fire.
Construction site fires are unfortunately common. Research completed by the National Fire Prevention Association from 2013 to 2017 reports that within that four-year window, there was an estimated average of 3,840 fires in structures under construction, and 2,580 fire within renovation projects each year. These fires caused an average of $408 million in damages each year reported.
Unfinished project sites like the St. Paul hotel can be especially vulnerable to fire damage because the building or structures on-site are incomplete.
Not only might the proper fire barriers and protection systems not yet be in place, but active construction sites house more flammable sources — such as chemicals and equipment — which can accelerate a fire’s growth and worsen its damage.
Project owners can still be left on the hook for unpaid completed work, as well as any remaining materials onsite, even if the entire structure is destroyed.
Read more: How a Construction Fire Affects Contractor Payments