Nearly a year after its soft opening and months after receiving its permanent Certificate of Occupancy, those responsible for building The Line Hotel face renewed scrutiny from the subcontractors who performed construction work on the glamorous Adams Morgan hotel. Dozens of these workers have complained publicly and privately that they still haven’t been paid, in some cases for work completed about four years ago.
City Paper spoke with four subcontractors, whose claims range in size from $40,000 to over $1 million. About 30 subcontractors who worked on the project appear to have claims, according to email communications between the project’s general contractor and its subcontractors obtained by City Paper.
Public tax and court records show that at least one of those subcontractors, Belfast Valley Construction, filed a lawsuit in September of 2017 against the hotel’s owner and general contractor in an attempt to enforce a $1.2 million mechanics’ lien against The Line. (The parties are currently in mediation.) Mechanics liens are security interests in the title of a property, a way for subcontractors to raise legal claims against them.
It’s the latest revelation undermining The Line’s stated mission with this project: to build a community-minded space in Adams Morgan that benefits District and neighborhood residents. A former church that sits off of Columbia Road NW and Champlain Street NW, The Line has attracted some of the District’s most in-demand creatives in its new incarnation. And the renovated space includes a multi-thousand-square-foot community and nonprofit incubator space that includes a radio station.
Because of the amount of public subsidies funneled into the project, D.C.’s Department of Employment Services required that the majority of construction workers redeveloping the building be D.C. residents.
If the District finds that the hotel’s owners, New York-based property management and development company Sydell Group, complied with those and other requirements, Sydell can expect a $46 million tax break from the city staggered over 20 years. Sydell also owns and operates The Line hotels in Los Angeles and Austin, Texas.
But there are reasons to believe that Sydell hasn’t met those employment goals, known as the First Source law, and members of the D.C. Council have asked City Administrator Rashad Young to more closely inspect the project.
And now, subcontractors—the businesses with the material burden of meeting these First Source requirements, a process they say has been expensive and unrealistic—are growing increasingly distraught over the possibility that they’ll be on the financial hook for The Line. Many tell City Paper they feel as if they’ve underwritten the last year of the hotel’s construction work without having received payment for their services.
Neither the Sydell Group nor the Walsh Group, the general contractor hired to oversee The Line’s redevelopment, answered City Paper’s calls or responded to its emails detailing these allegations.
“You’ve got to get paid to keep the doors open,” says Brian Bradford of Belfast Valley Construction, the company suing The Line. “We’ve done everything we can—are literally doing everything we can do. Once again, we’re just trying to get paid. That’s what any contractor is trying to do. We just want to get paid.” (In an answer and counterclaim to Belfast’s complaint, an attorney for Walsh “denies that any such balance [$1.205 million] is due.” The Line’s owner, identified in its response to Belfast’s complaint as “Adams Morgan Hotel Owner,” says in its response that it “has no liability to [Belfast], a subcontractor, because AMHO does not owe any amount of money to its general contractor.”)
For the businesses that haven’t yet been paid, delayed payments—especially non-payments—can be devastating, resulting in staff cuts and other reductions in service. Failing to pay debt on time can also negatively affect a business’ credit rating, which has a domino effect for businesses: Low credit scores mean companies can’t get bonding; companies can lose their credit accounts for not paying on time, and lose good personnel because payroll is late; they can’t finance multiple projects, so they can’t grow.
“Any time we don’t get paid, it has an impact on our ability to do payroll and do vendor payments and that kind of thing,” says Ronald Hunt, vice president of Capitol Sprinkler Contracting, which Hunt says is owed around $100,000. “We’ve paid all our vendors and employees on the project, but it’s [that] money that allows us to stay in business and make a profit.”
Jason Glatt is the president of Advanced Window, Inc., a Maryland-based company Glatt says is owed $130,000 and hasn’t been paid this calendar year. Glatt says the company also filed a mechanics’ lien against The Line. Of the way the project was run, Glatt says: “It was a setup for failure from day one.”
While payment schedules typically run between 45 and 60 days, Glatt says, from the beginning of his company’s work on The Line in 2014, he received payments every 90 to 120 days. “In 2014, when we were hired, it would have crippled us significantly,” Glatt says. While the company has been around since 1994, he says it hasn’t been until the last couple of years that it’s grown enough “to absorb [the nonpayment] without much impact.”
The president of one subcontracting company, who requested anonymity because their company routinely works on projects in D.C., says the company stopped receiving money “just as we were getting to the end” of their contract with Walsh. They’re owed more than $40,000, according to an invoice the executive sent City Paper, an amount that would cover a week’s payroll for every company employee.
Each of the four subcontractors City Paper spoke with independently said their respective businesses are just one of many waiting for payment. “I’m a small piece of these millions of dollars they owe for this project,” the anonymous executive says.
It is unclear whether Sydell or Walsh is at fault for failing to make timely payments. But several email chains obtained by City Paper, containing conversations between Walsh executives and dozens of subcontractors, show that Walsh has also had difficulty securing payments from Sydell. (Jim Naughton, the Walsh employee serving as The Line’s project manager, did not respond to City Paper’s requests for comment.) Hunt and others say that Walsh employees have indicated that they, too, have not been paid in full by Sydell.
This confusion isn’t a rare occurrence in construction projects, due to the way project management is structured. A developer hires a general contractor to oversee the development of a particular project, and their contract details the work that the general contractor is expected to deliver. The general contractor then hires construction companies—the subcontractor—that typically specialize in one line of work, like electricity, window work, or air conditioning, to finish the job.
General contractors generally can’t pay their subs until the property owner has paid them, so for the subcontractors, it’s at times difficult to know who in the chain is responsible for nonpayment.
“It’s not like this is only with Sydell and Walsh. This happens across our industry. You don’t know if you’re given a contract by the general contractor, [who] has his own agreement with the owner. Then the general contractor comes up with, ‘Oh, can you add this [work] to it? It could be that it’s already in the general contractor’s scope and they forgot to add it to yours. They come back and say, ‘Oh, we’re having a tough time getting money from the owner,’ when really they’re trying to figure out” how to absorb the extra work from you for free, the executive says.
“Whatever the case is here, all us subcontractors did the work,” the anonymous executive says, “and we’re the ones holding the tabs waiting for Walsh or Sydell, figuring out, how are they going to get us paid? Or waiting for them to say, ‘We can pay you 50 cents on the dollar.’”