Developer at Ocean Reef in Key Largo sues investors
A developer with plans to build 15 homes in the posh Ocean Reef community on the northern edge of Key Largo has sued its Panama-based venture capital investors for allegedly not providing the promised funding.
As a result, said the developer Cinnamon Cay LLC, the company incurred damages in excess of $5 million, both because it was forced to take out a high-interest loan of more than $8.1 million and because it was delayed in constructing the homes.
“The delays also discouraged potential purchasers from buying the homes being built by the joint venture,” according to the suit, which was filed last month in Miami-Dade County Circuit Court.
Cinnamon Cay entered into the joint venture agreement with Inversora CRV Inc. of Panama in April 2012, the lawsuit said. Under the deal, Inversora was to contribute $36.1 million to the project. However, the company only provided $21.9 million, the suit alleges. The shortfall of more than $14 million is what forced Cinnamon Cay to take out the $8.1 million loan. Due to tight lending standards in the aftermath of the housing crisis, Cinnamon Cay couldn’t obtain a traditional loan and therefore borrowed the money at a very high interest rate, the suit said.
In 2013 Inversora assigned its half of the joint venture agreement to another Panama concern, Fondo de Inversion Immobiliario Cayo Largo, which is also named as a defendant in the suit.
The law firms that are listed as the registered agents for the Panamanian companies didn’t respond to emails from The Real Deal seeking comment.
Cinnamon Cay also asserts in the suit that according to its agreement with the financiers, homes from the project are to be sold for at least $610 per square foot. However, market conditions have forced the developer to sell seven of the homes that have already been constructed for less than that amount. According to the agreement, Cinnamon Cay is to absorb 80 percent of losses for discounts of 9.85 percent or more below that $610 figure. But the company is asking the court to invoke a clause in the contract that would reduce that figure by a third due to the alleged failure of Inversora and Fondo de Inversion to fully fund the Key Largo project.
Cinnamon Cay is asking for a jury trial.