Edgardo Defortuna faces lawsuits over two of his condo developments

He was accused of cheating sources of financing for Jade Ocean and blocking the sale of a low-rise condo next to the 52-story Ritz-Carlton condo in Sunny Isles Beach

TRD MIAMI /
Dec.December 16, 2018 03:05 PM

Edgardo Defortuna(Credit: Ocean Drive Magazine)

UPDATED Dec. 17, 4:30 p.m.: Developer Edgardo Defortuna faced three lawsuits alleging he cheated small sources of project financing and advanced a condo development by blocking the sale of an adjacent property. But a Miami-Dade Circuit Court judge on Monday dismissed a case that could have led to a trial in a suit brought by three plaintiffs.

Capital Building, Florida Beach Investment and Spartan Lending had alleged that Defortuna lied when he claimed a big loss on his Jade Ocean condo development in Sunny Isles Beach while paying fat fees to corporate affiliates under his control.

In an email statement to the Miami Herald, Defortuna said this lawsuit “is completely without merit, and I look forward to the date that the court dismisses these false and unsubstantiated claims, once and for all.”

Capital Building and Spartan Lending each loaned $250,000 to the Jade Ocean project, and Florida Beach made a $500,000 equity investment. But they claim they were told that Jade Ocean was unprofitable, and they never recovered the money they put into the project. Each plaintiff seeks three times the money they put into Jade Ocean as damages, plus accrued interest.

In their lawsuit, the three plaintiffs alleged that Defortuna made “preferential” payments of interest and principal to companies controlled by his Fortune International Group. For example, Fortune paid one of its affiliates the principal amount of a $7 million loan to the Jade Ocean project plus “substantial interest.” Fortune also paid “inflated” fees and commissions to an affiliated management agency and sales group for their work on the Jade Ocean project.

The three plaintiffs also claimed that Coral Gables-based accounting firm HLB Gravier produced a misleading audit and fake financial reports showing that the Jade Ocean project lost about $63 million. The plaintiffs’ own analysis shows the project generated a $100 million profit, close to the developer’s projected profit of $105.7 million in a prospectus.

In a separate lawsuit, another lender to the Jade Ocean project, Iver Invest and Trade, claims that Defortuna defaulted on a $2 million loan with an unpaid balance of $1.5 million, plus accrued interest.

Fortune International Group’s law firm Coffey Burlington has filed a motion to dismiss Iver’s lawsuit, claiming the lender waited too long to sue. A hearing on the motion is scheduled for January.

In a third lawsuit, the owners association at the Tropicana Condo in Sunny Isles Beach alleges that Defortuna and a partner blocked a sale of all 48 units at the Tropicana to advance their development of a taller condominium on an adjacent site.

According to the lawsuit, Defortuna formed a partnership with two other defendants, Chateau Group and its principal Manuel Grosskopf, to build a 52-story condominium under the Ritz-Carlton brand next to the nine-story Tropicana Condo.

The lawsuit alleges that the developers arranged for straw buyers to acquire five of the 48 units at the Tropicana Condo, just enough to vote against and block a deal to sell the entire Tropicana building for $115 million.

Glen Waldman, an attorney for the Tropicana Condo owners association, told the Miami Herald that Defortuna and Grosskopf arranged for the unit purchases by straw buyers because they were promising potential buyers of units on the upper floors of the Ritz-Carlton condominium that they would have unimpeded views of the ocean and beach to the south, where the shorter Tropicana building is located.

While acquiring condos through straw buyers is legal, Waldman said the inability of Tropicana owners to sell their units to a developer prevented them from collecting about $2 million each. [Miami Herald]Mike Seemuth


Related Articles

arrow_forward_ios
Edgardo Defortuna and a rendering of La Playa de Varadero

Not stopping for the pandemic: Fortune, Château could launch Sunny Isles project by year-end

Not stopping for the pandemic: Fortune, Château could launch Sunny Isles project by year-end
Diego Arnaud and Ritz-Carlton Residences, Sunny Isles Beach

Mexican steel CEO buys condo at Ritz-Carlton in Sunny Isles

Mexican steel CEO buys condo at Ritz-Carlton in Sunny Isles
Rendering of the Ritz-Carlton Residences, Sunny Isles Beach with Manuel Grosskopf and Edgardo Defortuna

Ritz-Carlton Residences Sunny Isles developers pay off $212M loan

Ritz-Carlton Residences Sunny Isles developers pay off $212M loan
Ritz-Carlton Residences Sunny Isles Beach (Credit: Sunny Isles Property Venture LLC and iStock)

Gastroenterologist buys unit at Ritz-Carlton Sunny Isles

Gastroenterologist buys unit at Ritz-Carlton Sunny Isles
Gables Town Colony apartment complex, Sue Ansel of Gables Residential

Gables Residential scores $85M loan for Boca Raton apartment complex

Gables Residential scores $85M loan for Boca Raton apartment complex
Only 20% of Related Group’s commercial tenants paid rent in April

Only 20% of Related Group’s commercial tenants paid rent in April

Only 20% of Related Group’s commercial tenants paid rent in April
Broadstone City Center with Alliance Residential’s Bruce Ward and Nuveen CEO Jose Minaya

Nuveen pays $103M for West Palm luxury apartments

Nuveen pays $103M for West Palm luxury apartments
From left: Edgardo Defortuna, Ron Shuffield, Ana Bozovic, David Martin and David Arditi

The cold spell blanketing South Florida’s luxury condo market will continue in 2020, experts say

The cold spell blanketing South Florida’s luxury condo market will continue in 2020, experts say
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...