Tahl investors sue to open financial records

Mar.March 30, 2012 05:30 PM

Tahl Propp, a Manhattan-based real estate developer and one of the biggest landlords in Harlem, is facing litigation from multiple investors who allege the company has ignored repeated requests to inspect the company’s financial records.

In a March 23 lawsuit in New York State Supreme Court, investors including Jam Capital Assoc., Pies Plus and the SD Pines Family, allege that the company, led by Joseph Tahl and Rodney Propp, have refused to allow them to review the company’s books or tax records, amid concerns that some of the $3.8 million they invested has not been properly accounted for.

Tahl Propp, which owns or operates more than 4 million square feet of residential and commercial real estate, is a major developer of affordable and market-rate housing in Harlem and owns a number of properties that are subject to the rule of the U.S. Department of Housing and Urban Development, according to the suit.

Tahl Propp owns about 3,500 units of housing in Harlem, including 1890 Adam Clayton Powell Jr. Boulevard and 1900 Lexington Avenue.

The plaintiffs say they have invested nearly $3.8 million into various real estate funds controlled by Tahl Propp since 2001 and the company has since 2005 stopped providing audited financial statements to their investors. They say that while the funds were performing well early on, since 2006 and 2007 respectively, at least two of the funds controlled by Tahl Propp stopped paying distributions back to the investors.

The plaintiffs allege that Tahl Propp has broken repeated promises since 2009 to provide annual or semi-annual financial statements and other detailed accounting of their expenditures. In addition, they claim that a limited liability company controlled by Tahl Propp has been lending millions of dollars to other LLC’s within the overall real estate portfolio.

“The admission of significant inter-company lending was alarming on multiple levels,” lawyers for the investors wrote in the complaint.

Among the additional concerns raised in the suit are whether affiliate firms are being paid management fees in violation of prior agreements. For example, the suit alleges that in 2009, tax returns showed a $7.9 million liability to affiliates of the company, but did not provide any detail about the identity of the affiliates or the purpose of the payments.

“I’m not really familiar with it,” Tahl told The Real Deal. “I don’t have any comment on it.”

As The Real Deal has previously reported, Tahl Propp has faced significant complaints from tenants and housing groups in Harlem alleging the company failed to maintain its buildings properly, a charge that the company has vehemently denied. Tenants have opposed attempts by Tahl Propp to expand its holdings, including a 2011 effort to buy an East Harlem parcel that would be used for affordable housing at 107th Street and Park Avenue.

Tahl Propp previously settled a $3 million lawsuit at the Normandie, a converted condominium at 100 West 119th Street, amid allegations of construction defects. Residents at the building have told The Real Deal that the defects have been repaired following the settlement.

A spokesperson for HUD was not immediately available. Lawyers for the plaintiffs were not available for comment.

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