Owner cites water damage from what he calls defects

The developer of Gresham Station is incredulous about the reasoning behind a $40 million lawsuit filed against his company and four builders for alleged construction deficiencies at the busy shopping center.

Westlake Properties, owner of Gresham Station, is seeking close to $40 million in damages for alleged design and building defects that apparently led to water-related problems. Filed in January in Multnomah District Court, the suit names Bruning's company, Center Oak Properties, and four contractors involved in building Gresham Station and the adjacent Gresham Station North office building.

Center Oak Properties sold the property to Westlake soon after Gresham Station was built in 2001.

The suit details items resulting from 'faulty workmanship, improper or defective materials, or noncompliance with acceptable building codes, industry standards, or manufacturer's specifications and guidelines.' Problems with exterior joints, sheathing installation, wood-trim treatments, flashings, venting and roof slopes are among issues blamed in the suit for recurring water damage.

Bruning, a longtime Gresham resident who runs CenterCal, the successor to Center Oak, from an office in Tualatin, is perplexed about the lawsuit's timing.

'We sold (Gresham Station) six years ago,' he said. 'We never heard a word about leaks. It suggests perhaps the (building) maintenance was not what it should have been.'

Bruning particularly questions the inclusion of Gresham Station North, a complex housing L.A. Fitness that was built after Center Oak sold the property, in the suit.

'We didn't even build that,' he said of Gresham Station North. 'Westlake had all the records. We exercised due diligence' in the transaction.

Regardless, the developer expected to hear from Westlake much earlier if there were significant construction defects. He said the lawsuit was the first communication he's had with the company since the 2001 sale.

'We're kind of in the dark,' he said of his business associates and contractors named in the suit. 'To hear about this (initially) in a lawsuit is very unusual.'

Westlake is seeking around $28 million in compensation for damages and diminished property values from the former Center Oak Properties and general contractors Woodman Construction and Bayley Construction in Washington, as well as Oregon-based Larkin Construction.

The company also seeks approximately $11 million for alleged damage to Gresham Station North from Center Oak and contractor Robinson Construction.

Philip Joseph, a lawyer with Ball Janik representing Westlake, said his client chose litigation when construction flaws and water damage became apparent over time.

'The company did not know the extent of the problems' when the complex was purchased, Joseph said. 'It typically takes a few years of the rainy season in the Northwest to find out these kinds of problems. What was first thought to be isolated events became more widespread.'

Westlake hired a forensic consultant to investigate the extent of the problems. The results convinced Westlake and its legal counsel there was possible negligence during the development and construction phases of Gresham Station.

'Lack of due diligence may have caused a defective situation,' Joseph said.

Bruning praises the work of the contractors and architectural firm Perkowitz and Ruth. He strongly disputes the suit's claim of negligence.

'I think we did everything properly,' he said. 'We had the best architects and the best builders … We did everything to the best standards in the industry.'

'They're the experts,' he added about the project's designers. 'The last thing we do is tell an architect how to build a (roof) flashing. These are all among the greatest contractors in the Northwest.'

Bruning points out that Gresham Station has been a thriving retail center since it opened. He said he sees no evidence of how alleged water damage has affected retail operations at the complex.

'The amount of the suit is more than the whole center cost to build,' he said.

While conceding the supposed damages have not directly harmed tenants' business, Joseph notes the problems affect relationships with tenants and diminish overall property value.

'The property would not be worth as much if these problems continue to manifest themselves,' he said. 'If the client seeks to sell, it (would) be a sharp discount' of its potential value. 'As these problems worsen, tenants could vacate the premises and make replacing them more difficult.'

Bruning, whose CenterCal Properties has another office in San Mateo, Calif., said he was confident the merits of the suit will come under close scrutiny.

'At some point in time it's your responsibility,' he said of buyers such as Westlake. 'I know when I have a leak, I fix it.'

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