The Arden Group and Hello Living started out as partners on the acquisition of an Inwood development site. Now, the two developers are adversaries in court, having filed lawsuits against each other this week over their failed venture.
After the partnership over 4650 Broadway broke down, Arden went ahead with the deal alone. Last week, it paid $54 million for the site that spans 47,000 square feet and is in an Opportunity Zone. Arden wants to bring a 300,000-square-foot mixed-complex that will include market-rate and affordable rentals, Commercial Observer previously reported.
The Philadelphia-based developer contends it severed the partnership with Hello Living when their shared lender backed out of the original deal amid concerns over Hello Living’s legal entanglements.
Eli Karp — who owns Hello Living — alleges Arden owes millions in damages for backing out of a deal. He also contends Arden used Hello Living’s $2 million deposit to close on the site itself.
On Monday, Arden filed its lawsuit, seeking “declaratory relief.” It contends Hello Living has no rights to the Upper Manhattan property, and is not entitled to damages.
The next day, Brooklyn-based Hello Living filed its own suit in Brooklyn Supreme Court. The company contends Arden owes at least $38 million for breach of contract. Hello Living says it had negotiated the final $54 million deal, not Arden, and it had sourced the lender not Arden. The filing also alleges that Arden used Hello Living’s marketing materials and technical drawings to secure investors.
The law firm representing Hello Living, Oved & Oved LLP, also called Arden’s court filing a preemptive move, adding it was a “transparent attempt at legitimizing its blatant wrongdoing.”
Arden and its attorneys did not respond to requests for comment.
The dispute has roots that date back to November 2018. That’s when Hello Living entered into a contract to buy the site from FBE Limited for $55 million. Hello Living put down a $2 million deposit. That deal fizzled.
A few months later, Arden teamed up with Hello Living. The duo used the $2 million deposit Hello Living had already paid FBE, with Arden adding another $2 million, according to Arden’s lawsuit. Arden would provide most of the equity, with Hello Living contributing a portion, and agreeing to develop the project.
The joint venture sought financing for the purchase from Scale Lending, a financing venture of Slate Property Group and Carlyle Group. Scale later withdrew, after a review turned up “recent public lawsuits accusing Karp and his companies of defaulting on deals, and fraudulent and illegal accounting practices,” according to Arden’s complaint.
That’s when Arden cut ties with Hello Living, then secured a $44 million loan from Scale on its own. Scale, which isn’t party to the case, declined to comment.
Arden claimed Karp then began sending accusatory emails following the termination of their venture.
“I want everyone to know what a bunch of liars you are,” part of Karp’s email read, according to Arden’s complaint. “You may think that you got rid of me but I don’t go away & I always follow through. I don’t care how long this will take. I’ll make you pay.”
This is at least the third legal tussle Karp and his firm have been engaged in this year. Earlier this year, Hello Living was sued for not following through on a Bronx property purchase, and in August, the company’s former controller filed a discrimination case against the firm. It also raised allegations over illegal accounting practices.