The Real Deal New York

Firm seeks to subpoena CBRE’s Darcy Stacom in connection with Kushner deal

September 30, 2009 08:42AM
By David Jones

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An AIG joint-venture firm requested a subpoena for CB Richard Ellis vice chairman Darcy Stacom for a videotaped deposition in its $25 million counterclaim against Kushner Cos.

The firm, East Coast Residential Associates, wants to depose Stacom in the case that stems from the 2007 deal in which it purchased 16,800 rental units located mainly in southern New Jersey and Pennsylvania, for $1.9 billion.

According to court documents obtained by The Real Deal, Judge Martin Schoenfeld has ordered Stacom to appear for the deposition at 10 a.m., Oct. 21. Michael Fazio, attorney for East Coast, told The Real Deal that the subpoena would be served within the next day or two.

Kushner Cos., the Florham Park-based real estate developer led by Charles and son Jared Kushner, also the publisher of the New York Observer, originally sued East Coast Residential in 2008, claiming it failed to hire 11 property managers that oversaw the rental properties in the portfolio.

East Coast counterclaimed that Kushner hid the existence of those 11 employees and therefore inflated the price it paid for the acquisition. It asked that the New Jersey court issue a $25 million judgment against Kushner for damages related to the lack of disclosure.

Kushner attorneys denied the counterclaims, saying that East Coast is using the allegations as a desperate attempt to cover up buyer’s remorse.

“What happens is they bought this at the top of the market and then the market deteriorated,” said Kushner attorney Barry Felder. “They said, ‘why did we pay so much for this?’ in a classic case of buyer’s remorse.”

For example, a Pennsylvania lawsuit filed by Morgan Properties now claims that following its takeover by the U.S. government, AIG has reneged on promises to spend more than $120 million to upgrade the portfolio.

East Coast is part of a joint venture that included AIG Global Real Estate Investment and Morgan Properties, which acquired the portfolio from Kushner in 2007.

Stacom was the broker for the seller, Kushner, which had marketed the 16,800- unit portfolio as part of a larger sell off of Kushner assets at the time. According to published reports, Kushner sold off the real estate portfolio to build up cash for future real estate deals and help pay for its mammoth $1.8 billion purchase of 666 Fifth Avenue, one of the biggest trophy acquisitions in New York history.

According to an affidavit filed in New York State Supreme Court, Stacom and other CBRE employees collected financial information on Kushner and placed it on a Web site available to prospective purchasers of the portfolio.

On Aug. 28, New Jersey Superior Court Judge Alfonse Cifelli signed an order requesting the out-of-state video deposition and production of documents. East Coast is asking that Stacom be ordered by a New York judge to appear before a certified court reporter at the New York offices of Riker, Danzig, Scherer, Hyland and Perrretti, which is representing East Coast in the case.

Stacom was not immediately available for comment.

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