BFC Partners violated a joint venture agreement it had with K&R Preservation by “secretly acquiring” low-income housing in 2013, according to a lawsuit filed by K&R.
The two companies launched their joint venture in 2010 with the purpose of buying, building, renovating and managing affordable housing projects, the lawsuit states. Both companies had a 50 percent stake in the venture, called Preservation Development Partners, and shared all development and transaction fees equally, K&R claims.
The agreement also disallowed BFC from taking part in separate preservation projects, which it defined as performing renovations in occupied multifamily buildings, according to K&R’s suit. If BFC did take part in such a project, K&R says it would be entitled to a share of the profits and fees.
This is exactly what happened in 2013, when BFC formed a joint venture called 360 Preservation with Ron Moelis’ L&M Development Partners, the suit argues. BFC acquired 16 buildings in Brooklyn, the Bronx and Manhattan for just over $29 million through this partnership, and they are currently at work on renovations such as installing new windows and roofs, upgrading kitchens and making security improvements.
The lawsuit says the 360 Preservation Project is in “direct violation” of the pact between BFC and K&R.
“They had an agreement that allowed them to do certain things but not any preservation work,” said Jeffrey Metz, an attorney for K&R, “and they did this behind my client’s back.”
K&R, which primarily manages affordable housing projects and is led by Francine Kellman and Brian Raddock, is now suing BFC for $10 million and a portion of the money the developer received from its venture with L&M.
Representatives from BFC, which is one of the developers behind the Essex Crossing megaproject as well as the controversial Bedford-Union Armory redevelopment in Crown Heights, declined to comment.
Through Preservation Development Partners, BFC and K&R last year bought a $60 million portfolio of Bronx and Brooklyn properties together from Black Spruce Management. The eight buildings—five in the Bronx and three in Brooklyn—contain 324 apartments and are all fully occupied and part of the Section 8 housing program. The joint venture also acquired the four-building Albert Goodman Plaza complex in the Bronx for $41 million in 2014.