Contractor stiffed on historic Seattle remodel project

David Steinbach saw his future in the J&M Hotel from day one.

The planned redevelopment of the J&M Hotel in Seattle’s Pioneer Square represented a lot of things for the young hotelier from California: The chance to turn a historic building into an upscale modern hotel; the chance to work on a large-scale project from the ground up; the opportunity to have a big stake in a company that stood to make a tidy profit.

“I fell in love with the fantasy of this beautiful hotel in Seattle,” Steinbach said in recent interviews with SeattlePI.

That fantasy turned out to be just that. After nearly two years of work that included a move from California to Seattle, Steinbach was stiffed out of $95,000 and the project has fizzled.

What’s more, Seneca Ventures, the company behind the historic remodel of the 128-year-old J&M and the nearby Metropole building, failed to properly register with the state and didn’t disclose risks to investors who poured more than $2.5 million into the two projects, according to an order filed in October with state financial regulators.

Kurt Fisher, a managing partner of Seneca Ventures, did not respond to multiple requests for comment.

Seneca was also behind the purchase of another Seattle property, an apartment building in Westlake, where residents were given rent hikes as high as 121 percent while unpermitted remodel efforts made the building "uninhabitable." In a lawsuit brought by former tenants, a judge in October approved an order effectively putting a $105,000 lien on the building until the case is settled.

Read our accompanying story about the state investigation here.

Meanwhile, Seneca put the J&M up for sale. The Metropole will likely follow.

And Steinbach wasn’t the only one left with a big unpaid bill.

Grand beginnings

When Steinbach first met Brittany Shulman in 2014, who with Kurt Fisher ran Seneca Ventures, she told him her company was planning to buy a property in Pioneer Square that had great potential. She didn’t want to say which building, but he knew right away.

He had already looked at buying the building with a friend, who eventually decided the project would be too much of a headache.

Steinbach immediately made a pitch as to why the building should be a hotel instead of a hostel, as initially planned. Shulman was convinced and set up a meeting with Fisher.

Soon, Steinbach was working on the entire hospitality plan for the project.

The building, originally built in 1889, would become a 48-room destination hotel with a new ground-floor restaurant space, a new music venue in the basement, as well as new retail space. Plans called for adding two floors to the original building while maintaining the historic elements.

The project costs would run to $10 million if things went to plan, on top of the $3.2 million that Seneca paid for the building.

"It was such a cool project that I really thought it was going to work out," Steinbach said.

RELATED: Historic J&M Hotel plans could be scrapped

It was the potential to save a historic building and repurpose it for something interesting that drew architect Matt Aalfs.

Aalfs, co-founder of BuildingWork architecture, enjoys restoring old buildings, particularly in an era when so much of Seattle is being torn down and rebuilt, he said in recent interviews with SeattlePI.

He took on the J&M and the Metropole building for Seneca, reimagining both properties in his designs for them as upscale hotel properties.

Aalfs’ firm was just starting out when he took on the two projects, and while he had a few other things going, the projects for Seneca were the biggest.

'Promise of tomorrow'

Steinbach didn’t know what to expect when he started working with Fisher. His experience in hospitality was mostly for larger companies, so he felt like working on the J&M must be what working at a start-up felt like, he said.

Indeed, in emails Fisher described the project as a “start up.”

"I always kind of thought they were flying by the seat of their pants, didn’t necessarily have it together," Steinbach said. "But they kept telling me how much money they had, let’s just get the work done and the money will be there when it’s needed."

But each time the project received an influx of cash, it wasn’t enough to pay Steinbach.

He own business, Steinbach Hospitality, kept enough money coming in to pay the bills, and, he said, Fisher kept promising money would come.

"It was always the promise of tomorrow," Steinbach said. "He just would give you enough rope to keep you. And he was just so friendly about it."

The two developed a friendship, Steinbach said. And while Fisher seemed to live lavishly and spend money freely, Steinbach believed he was working to make the J&M plans a reality.

Meanwhile, Steinbach developed business plans for the hotel, the restaurant, the downstairs music venue and oversaw much of the work that detailed how the project would make a return for investors.

He handled "rate and occupancy, service levels, how many housekeepers, hours, how many pens in each room, how many towels, what are we going to do about ice on each floor," he said.

Even with no money, soon Steinbach was so embroiled in the project that he worried it would fail if he backed out.

"The work I was doing, if I wasn’t doing that work, I thought the project would die without that work," he said. "And I didn't want to be the one to kill the project."

Risks mounting

There came a point in the work that Steinbach realized it might not be him that killed the project in any case.

As he continued to finalize plans for what would become J&M Hospitality Group, costs mounted.

Numbers coming showed risks bigger than he had anticipated, Steinbach said.

That’s when it "really started to skyrocket," he said.

Soon, Steinbach learned others involved in the project hadn’t been paid.

Aalfs, who had devoted significant resources to the two projects, was owed a six-figure sum, he said. Steinbach suggested it was a number over $130,000, but Aalfs didn’t confirm the exact amount.

Several others were also going unpaid, Steinbach said. In emails provided to SeattlePI, Fisher confirmed that others were left with no compensation.

"None if us are being reimbursed for our time, which was considerable," Fisher said in an August email to Steinbach, naming several others, including Shulman, who had worked on the project.

In October 2016, Aalfs got the group together and they all agreed to stop working on the projects for Fisher.

"It felt like going on strike," Steinbach said.

At one point, he billed Fisher for $30,000, what he called his “walk away money,” but Fisher, who is purported to have “amassed a portfolio of $150 million dollars in commercial properties in Washington state” with another company called Gibraltar, refused to pay him.

But by then, there may have been no money for Steinbach to collect.

Neither the J&M or the Metropole had moved ahead in any physical sense, and while permitting and other steps had inched forward, money seemed to be running out.

In February 2017, both buildings went into foreclosure. They were later set to be sold at auction June 2.

Aalfs won a lien against the buildings for his outstanding invoices, something he said he had never done in his career as an architect.

"It’s an act of last resort for an architecture firm," he said.

Fisher managed to get some financing that staved off the foreclosure auction, and that money was also used to pay off Aalfs.

Others, including Steinbach, are still owed money, Aalfs said.

Still, Fisher had promised as late as June to "make it right" with Steinbach. But when Steinbach didn’t hear back from him and sent another email asking for a meeting to discuss it, Fisher rebuffed him curtly.

"Our start up failed for multiple reasons, which we all share the responsibility for," Fisher wrote. "There are no assets to distribute anything to anyone. I offered you the opportunity to operate the music venues, but you declined. I consider this matter closed at this point."

The contract Steinbach had signed with Fisher disappeared from Seneca’s Pioneer Square office, leaving him little recourse legally.

After some more emails back and forth, Steinbach finally decided to go public with the story.

"It’s a kick in the shins. I wouldn’t wish what I’ve been going through on anybody," Steinbach said. "And i wouldn’t want him to do this again. It’s not right."

Daniel DeMay covers Seattle culture, city hall, and transportation for seattlepi.com. He can be reached at 206-448-8362 or danieldemay@seattlepi.com. Follow him on Twitter: @Daniel_DeMay.