Fixed and flipped? More like fix and flop.
An investor in Kushner’s Brooklyn Heights portfolio is now filing a vehement complaint against the company.
The Investor is known only as BLS Holdco LLC, file a lawsuit On Tuesday, Kushner and his chief executive, Laurent Morali, were charged with mismanaging the redevelopment and being ignorant of the financial and legal implications of the properties.
A representative for Kushner Companies told reporters: “We are disappointed that this particular investment has not been as successful as anticipated.” real deal.valued at injured by lawsuit The spokesperson added that the lawsuit was brought by the housing rights initiative, a tenant watchdog group, and said BLS Holdco’s claims were baseless.
The controversy surrounds six former Brooklyn law school dorms that Kushner, the real estate investment firm founded by Charlie Kushner, bought for $36.5 million in 2014 and plans to convert three of the properties into luxury single-family homes residence and will rent out three others. as an apartment building.
BLS Holdco claimed to have provided more than $10 million in equity in the project, the lawsuit said. first reported Pincus
Now, nearly a decade later, BLS Holdco claims that Kushner’s “poor financial performance” on the townhouse has reduced his investment to “annihilation,” and that the equity in three multifamily homes is now “close to zero.” “.
One of the reasons for flat returns from apartment buildings is said to be changes in state rent laws that limit landlords’ ability to raise rents for rent-stabilized units. BLS Holdco claims Kushner informed it that only seven of the 77 apartments in the three buildings required rent stabilization and that the remaining 70 could be rented out at market rates.
The investors allege that after renovating the buildings, Kushner failed to reregister the units with the state Department of Housing and Community Renewal, which the plaintiffs say would have made the units deregulated under then-current rent laws.
“Instead, Kushner simply ignored all regulatory measures and treated the units as free market units from the start,” the complaint said.
In 2018, Kushner, who was sued for charging exorbitant rents and deregulating units, agreed to pay $100,000 to tenants of a building at 89 Hicks Street. In 2020, a judge granted class action status to lawsuits brought by tenants in other buildings.
In a complaint this week, BLS Holdco claimed it would not have invested in the venture had it known that all units would be rent-stabilized.
“At no time, in any way, did Kushner raise the possibility that rent stabilization might be required for the remaining 70 apartments, even when investors disclosed potential ‘deal risk’,” the lawsuit said.
read more
As for the townhouses, BHS Holdco claimed that mounting debt, cost overruns (including “poor workmanship by the general contractor and inadequate oversight by Kushner”) and the eventual sale at a “fire sale” price resulted in a net loss.
“In all, Kushner lost more than $13 million on townhouse rebuilds during one of the strongest real estate cycles in recent history,” the complaint states.
