The Real Deal New York

“Doubly shocked”: Deane scions sue stepmom over Starrett City sale

Minority owner plaintiffs say they bid $900M, but managing partners hired "conflicted" broker Doug Harmon and sold for $850M anyway
By Will Parker | September 28, 2017 05:25PM

Carol Deane and Disque Deane, Jr.

The Starrett City megadeal has set off a family feud.

Limited partners of the massive multifamily complex in Brooklyn, including the children of deceased real estate mogul Disque Deane, have sued their stepmother Carol Deane’s company and other managing partners of the complex, alleging that the $850 million contract of sale to Rockpoint Group and Brooksville Company made earlier this month was inked below market value.

One of the plaintiffs, Starrett City Affordable (SCA), whose investors include San Francisco-based Belveron Partners and Maine-based LIHC Investment Group, claims in court papers to have made a $900 million bid for complex this summer, only to have it ignored by the managing partners. The limited partners together own a 15.4 percent stake in the buildings, now known as Spring Creek Towers. Carol Deane has controlled the managing partners since the death of her husband in 2010.

In their 31-page complaint, plaintiffs allege they were notified by the managing partners in July that Doug Harmon of Cushman and Wakefield had been retained to help “recapitalize” the project. According to them, nothing was mentioned about a planned sale.

SCA made offers to buy the complex outright as recently as August, before the sale was announced, and the plaintiffs describe being “doubly shocked” upon learning of the eventual sale amount, $850 million, to Rockpoint and Brooksville.

The complaint further describes Harmon as “conflicted” because he had worked with Brooksville principal Andrew MacArthur on the sale of Stuyvesant Town – Peter Cooper Village in 2015.

After the Starrett City deal was reported in the New York Times, SCA again offered to buy the complex, again for more than Brooksville and Rockpoint were offering, the plaintiffs claim. But the managing partners allegedly dismissed the bid as “speculative” and too “late-stage,” questioning SCA’s ability to close.

Harmon declined to comment. Carol Deane could not be reached for comment. The lawsuit was first reported earlier Thursday by the New York Daily News.

A spokesperson for plaintiff SCA told The Real Deal said after a Thursday hearing on the matter that there’s “evidence that both sides of this proposed deal colluded to mislead their investors and to keep the sale out of the public eye.”

While President Trump is not a plaintiff in the case, he is a limited partner and was expected to pocket about $14 million if the deal goes through. Other Trump family members also own small shares in the property, which has more than 250 investors. A source familiar with the Trump Organization’s business operations told TRD last week that neither Trump nor his trust had any involvement in the deal.

The Deane children and their partners are asking State Supreme Court Judge Saliann Scarpulla to void the sale of Starrett City and award damages and attorneys’ fees. At the hearing, however, Judge Scarpulla denied an initial request for a temporary restraining order against the defendants that would block the sale and the dispute is ongoing.