JDS accused of inflating costs at Park Slope condo project

Largo Development claims Michael Stern used proceeds to fund “lavish lifestyle”

New York /
Jul.July 22, 2020 07:00 AM
613 Baltic Street with JDS Development's Michael Stern and Largo's Nissim Ben-Nun and Nicholas Werner (Getty, BHS)

613 Baltic Street with JDS Development’s Michael Stern and Largo’s Nissim Ben-Nun and Nicholas Werner (Getty, BHS)

Michael Stern’s partner on a Park Slope condo development is accusing him of inflating project costs to finance his “lavish lifestyle” — the latest lawsuit in a three-year war over the site.

An LLC tied to Largo Development alleges that the JDS Development chief inflated the cost of 613 Baltic Street, a 43-unit condo project with a projected sellout of $90.9 million. The July 8 complaint, which was approved by the court on Monday, claims that through the use of JDS’s construction arm, the developer ramped up the project management costs to $5 million, or 290 percent above the initial budget.

The complaint claims JDS hiked the cost of construction and other expenses “to cover shortfalls on Stern’s other projects and businesses and finance Stern’s lavish lifestyle of private jets, fancy car collections, and elaborate residences.” According to the lawsuit, “Stern’s revenue diversion scheme not only purloined Largo’s share of the profits but also substantially bilked and artificially depleted Largo’s initial capital investments in the Project.” Largo is seeking nearly $40 million in relief.

An attorney for JDS, Paul O’Connor III, called the lawsuit “wholly meritless” and an attempt to “deflect attention” from two lawsuits JDS filed against Largo.

In May, JDS filed a complaint accusing Largo of fraud and breaching its contract at the Park Slope project, which the developer claims caused more than $11 million in damages and “severely impaired the profitability of the Project.”

On the same day, JDS filed a separate suit against Largo entities, alleging that the company’s founders, Nicholas Werner and Nissim Ben-Nun, misrepresented their development experience when they pitched partnering on 514 West 24th Street in West Chelsea, now the site of a condo building known as the Fitzroy. JDS and Largo bought the property together in 2014 for $34.75 million.

According to that complaint, a Largo subsidiary “mismanaged the project, causing severe delays and considerable increases to the cost of the project.”

When reached by phone on Tuesday, someone who answered the phone at Ben-Nun’s company extension hung up on The Real Deal when asked about Largo’s latest suit. A subsequent call went unanswered. Attorneys for Largo didn’t return messages seeking comment.

In its July complaint, Largo claims Stern’s lawsuits were the result of the developer “racing to the courthouse” when he learned of Largo’s intention to file a complaint.

In their separate lawsuits, Largo and JDS offer dueling accounts of how they came to work together. The companies both claim they were approached by the other for a prospective investment opportunity. Largo’s website prominently displays several JDS projects, including the Fitzroy, the American Copper Buildings and 613 Baltic Street.

Largo also alleges that it is exposed to claims in a 2018 lawsuit over the project at 613 Baltic. In that complaint, Tona Construction & Management accused JDS of reneging on their agreement to hire the firm as the construction manager and withholding financial information on the project. Earlier this month, Judge Barry Ostrager ordered that JDS needed to explain “in narrative form the flow of funds” into and out of its bank account and noted that the company had “stubbornly refused to comply with defendants’ discovery obligations.” JDS has appealed the order, though it appears a settlement conference is slated for August.

Write to Kathryn Brenzel at [email protected]


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