East End Capital and a pair of Australian investors were ordered to pay back a $5.5 million deposit tied to the failed $98.8 million sale of their office tower in downtown Miami.
BentallGreenOak had put the funds in escrow last year as part of its planned purchase of the 30-story 100 Biscayne office building at 100 Biscayne Boulevard and garage at 130 Biscayne Boulevard.
Toronto- and New York-based BentallGreenOak, led by Sonny Kalsi, pulled out of the deal to buy the 100 Biscayne tower because the sellers provided incomplete estoppel documents for four tenants, according to court filings.
The estoppels failed to disclaim that office tenants Bulgari, Cosmetics of France, Hublot and LVMH Fragrance – subsidiaries of French luxury conglomerate LVMH – were not involved in litigation, said attorney José Ferrer, who represented BentallGreenOak’s affiliate 100 Biscayne Owner. This was pivotal, as it protected BentallGreenOak from future claims by the tenants that they cannot pay rent because they are on the hook for large payments stemming from litigation, he said.
“If later, one of those tenants fails to perform under the lease, and they say, ‘The reason we are doing this is because there is a claim pending against us,’ that would eviscerate the guarantees the buyer bargained for,” said Ferrer, of Bilzin Sumberg.
Another issue was a disclaimer that “limited the estoppel to the actual knowledge of the person signing it,” Ferrer added. “That’s problematic because based on this, the tenant would be able to bury his or her head in the sand and purposefully ignore facts that would be readily available to the tenant upon proper inquiry,” he said.
Miami-Dade Circuit Judge Michael Hanzman in a ruling issued Sunday agreed the estoppels were incomplete and ordered the deposit returned to the buyer.
On Monday, the $5.5 million and roughly $3,000 in interest were refunded, Ferrer said.
“This is not a difficult case. These sophisticated parties, represented by sophisticated counsel, negotiated a contract that plainly and unambiguously conditioned purchaser’s obligation to close upon receipt of agreed upon tenant estoppel certificates to be provided by seller,” Hanzman wrote in his ruling. “Seller did not deliver the required estoppel certificates and purchaser exercised its right to terminate. It is just that simple.”
The judge also said one of the seller’s court arguments “borders on frivolity” and other claims were “disingenuous” and “bizarre.”
Michael Kreitzer, a Greenberg Traurig attorney for the sellers, declined comment.
New York-based East End Capital, led by Jonathon Yormak and David Peretz, as well as Australian investors Errol Dorfan and Kim Davis, were first to file suit against BentallGreenOak in August.
They said the claim of incomplete estoppels was a “false narrative” brought up at the last minute to push for a lower price. Because BentallGreenOak defaulted on the deal, the sellers were entitled to keep the deposit, according to the complaint. BentallGreenOak countersued for its deposit in September.
This is at least the second lawsuit to arise over the 100 Biscayne tower this year, as East End Capital as well as Dorfan and Davis are locked in a separate case.
Dorfan and Davis in February sued East End Capital for more than $50 million in damages. The investors claim East End Capital misled them to pony up acquisition financing and renovation capital, but mismanaged their roughly $28 million investment. East End Capital denied the allegations.
New WT Miami, an affiliate of East End Capital, as well as Dorfan and Davis, bought the 324,407-square-foot tower in 2016 for $84 million.