A dispute has erupted over construction of the high-profile Austin Avenue Flats downtown, with the general contractor and several subcontractors filing liens claiming they are owed nearly $2 million.

Austin Avenue Flats, which features 45 loft apartments and two restaurants, anchors a $100 million development downtown called Waco Town Square that city leaders see as key to an inner-city renaissance.

Construction of these flats essentially is complete.

But William Taylor & Co., the Waco-based general contractor for the project, claims in a lien filed in the McLennan County clerk’s office that it has not been paid all it is owed.

Michael Wray, managing partner for Austin Avenue Flats, characterized the problem as a “contract dispute” that will be worked out soon.

Richard G. Thomas, a Dallas attorney representing Taylor, said the total price of the work is $8.89 million but that his client has been paid only $6.99 million, leaving a rounded balance due of $1.89 million.

“Because William Taylor is unpaid such a large amount from the owner, he is unable to pay subcontractors. The extreme size of this unpaid debt places both William Taylor and its subcontractors in extreme hardship,” Thomas said, adding that is why Taylor and several subcontractors have filed liens. A lien puts a hold on property until a debt is paid.

If the debt remains unpaid, Thomas said, Taylor will file suit against the owner to collect the amount due on his mechanic’s and materialman’s lien.

The suit would seek a court order for the McLennan County Sheriff’s Department to seize the property, sell it at public auction and apply the sale proceeds to the unpaid debt.

Wray said the matter will never come to that.

“We anticipate a quick resolution, which is what we’re trying to work out right now,” Wray said. He added that he has no cash-flow problems related to the project.

“This is strictly a contract dispute,” he said.

Thomas replied, “Whether it gets resolved shortly is up to Mr. Wray.”

Wray said Austin Avenue Flats “has been a very successful project, great for downtown,” with all but seven of the 45 loft apartments either sold or leased.

Wray said because the development is so nearly full, he has removed the Austin Avenue Flats Web site and is handling all leasing and sales on-site.

Two restaurants — The Olive Branch and Square Bar & Kitchen — also do business there.

Wallace Bajjali Development Partners, of Houston, is a minority partner in Austin Avenue Flats, holding a “25 to 30 percent interest,” company principal Dave Wallace said.

But Wallace Bajjali is a bigger player in the overall development of Waco Town Square. It formed SWB Partners to lease 9.4 acres from the city to accommodate Waco Town Square and is building the 374-bed student housing complex on Washington Avenue called Heritage Quarters.

“Anything going on in Waco Town Square is important to me and to all the development taking place,” said Wallace, who drove to Waco on Wednesday to meet with Wray and Taylor.

Afterward, Wallace said, “There definitely is money owed to Taylor, but according to (Wray), it is not $1.8 million.”

At least four subcontractors also have filed liens, claiming they are owed money.

These include Nemmer Electric, $106,378; Farmer Masonry, $56,700; CenTex Carpet & Interiors, $208,349; and Rick Shelton Plumbing, $123,418. These are subcontractors for William Taylor & Co. that would be paid from the $1.89 million in dispute.

Jim Vaughan, president of the Greater Waco Chamber of Commerce, said Taylor and Wray entered into this arrangement “in good faith,” and he believes they will get the issue resolved.

The chamber has a stake in Waco Town Square because the development shadows the chamber’s new $4.3 million headquarters at 101 S. Third St. One building proposed to be built on the Franklin Avenue side of the headquarters could offer retail, restaurant, office or bank space.

Some have credited the chamber’s new building with getting progress downtown rolling.

“But downtown is a big area,” Vaughan said. “We’ve got too many people committed to it and who believe in it to think any single development would make it or break it, either ours or that one (Austin Avenue Flats).”

City Manager Larry Groth said the city was notified of the liens because it owns the ground under the development.

But he said the city has no financial or legal exposure in the dispute. He said the city never gave any incentives for the development except for a long-term ground lease, which is being executed in phases.

He pointed out that the development agreement and lease are not with Wray but with SWB Partners, headed by Wallace, who is ultimately responsible for completing the project.

Groth said Wallace has assured him that the project will move forward.

“This is just one of those things that happen in construction,” Groth said. “Even though there are large amounts of money involved, sometimes in construction there are disputes about what’s been done and what’s been paid. Hopefully, they can work through that and get a settlement.”

Tribune-Herald staff writer J.B. Smith contributed to this story.

mcopeland@wacotrib.com

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