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Ex-CBRE brokers sue British bank over 183 Madison, 100 Fifth sales
At left: 183 Madison Avenue; at right: 100-104 Fifth Avenue; top: Scott Pudalov; bottom: Alan Wildes
Two
former CB Richard Ellis brokers are suing British bank HBOS PLC to
block the sale of two Manhattan office buildings purchased at the
height of the real estate market, the Wall Street Journal reported. The
bank had been both an equity partner in and a lender to U.K.-based Rock
Joint Ventures when, like many foreign investment groups, it started
eyeing the U.S. real estate market in 2007. To help, the group enlisted
CBRE’s Alan Wildes and Scott Pudalov, each of whom say they were given
equity stakes in the two properties and promised the opportunity to
earn commissions from leasing, according to a complaint (see the full
document below). The group purchased the buildings in question — 183
Madison Avenue and 100-104 Fifth Avenue — in April 2007 for $107.5 million and in February 2008 for $152 million, respectively, according to the complaint. But when HBOS took over Rock in 2009
and began bankruptcy proceedings, the brokers claim they were wrongly
forced out of their roles and that mismanagement caused the buildings’
value to drop from a combined $320 million to $130 million between
January and August 2009. Now that the buildings are for sale — at a
depressed asking price — Wildes and Pudalov are seeking an injunction
to stop it and to appoint a receiver to handle the transaction. As the
Journal points out, the lawsuit raises the question of whether a
conflict of interest exists when a bank is both a lender and an
investor in the same entity. [WSJ]