Urban Oaks Builders, a construction company affiliated with Houston-based Hines, has filed for bankruptcy protection amid a lawsuit alleging that the company did not disclose construction defects to the buyer of an apartment complex it built in Florida.

Urban Oaks said its Chapter 11 filing was precipitated by the lawsuit and exacerbated by a dispute with the builder's insurance carriers over coverage for the claims.

The bankruptcy filing was made on Aug. 31 in U.S. Bankruptcy Court for the Southern District of Texas. It shows that Urban Oaks' estimated assets are valued at between $10 million and $50 million and its liabilities are between $50 million and $100 million.

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Earlier this year, Southstar Capital Group of Palm Beach, Fla. filed a lawsuit against Hines, claiming it knowingly failed to disclose building defects when Hines sold an apartment complex built by Urban Oak Builders to Southstar in September 2016. Southstar paid $67 million for the 306-unit complex in Celebration, Fla.

Hines developed the complex and Urban Oaks Builders was the general contractor on the project, then called Aviva at Celebration. It has since been renamed Sola at Celebration.

"Southstar has a proven track record of buying and operating quality apartment communities and certainly would not have purchased Sola at Celebration for the market price listed had the defects been disclosed," Gina Williams, president and chief financial officer of Southstar Capital Group, said recently in a statement. "The fact that Hines knew about the issues and hid them from us is appalling and fraudulent."

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Urban Oaks, an independently operated affiliate of Hines, said the bankruptcy filing will allow it to fund operations and projects.

"We regret that this situation has forced our hand in this matter. But we believe that the Chapter 11 filing is the best way to avoid any disruption or interference with Urban Oaks' work resulting from the Southstar and coverage lawsuits or their ultimate outcome," Urban Oaks said in a statement.

Source: https://www.chron.com/business/real-estate/article/Hines-affiliated-files-for-bankruptcy-amid-13204422.php