Boca Raton investor allegedly concealed $3M warehouse sale from minority partner: lawsuit

A Boca Raton-based real estate investor allegedly kept a minority partner in the dark about a $3.2 million warehouse deal to avoid sharing the sale proceeds, according to a recently filed lawsuit.

The partner, 1112 Development, is suing Mark Spillane, who owns the commercial real estate firm The Eire Companies; real estate attorney Mitchell McRae; selling entity South Mack I and the buyer in connection with the January sale of two industrial properties at 806-818 and 820-826 Northwest 10th Terrace in Fort Lauderdale.

Spillane allegedly “bilked” the partner out of more than $500,000, according to the complaint filed last month in Broward County Circuit Court. Corporate records show the partner, 1112 Development, which owned a 28 percent stake in the ownership entity, South Mack I, is managed by Maureen Bokzam and David Rowley of Delray Beach.

South Mack I sold the warehouses to an affiliate of Excelsior Capital, a Nashville, Tennessee-based commercial real estate investment firm, property records show. The complaint seeks a court order rescinding the sale if Spillane doesn’t pay the partner its cut.

Spillane, with McRae’s alleged assistance, closed the sale without his client’s knowledge, forcing the minority partner to sue in order to collect its share, Joshua Alper, an attorney for 1112 Development, told The Real Deal.

“It was a very lengthy fraud that was perpetrated on 1112 Development,” Alper said. “Mr. Spillane absconded with the money. My client received zero dollars that [it] is rightfully owed.”

The entity 1112 Development’s authorized representative Michael Bokzam found out about the sale on his own after Spillane allegedly misled him that the deal had not closed, Alper said. In a Feb. 11 letter attached to the lawsuit, Alper also notified Excelsior Capital president and founder Brian C. Adams and Vice President Sam Peacock that the “unauthorized and potentially fraudulent sale” was void.

“Unwinding this whole thing and figuring out who knew what and who had substantial participation in perpetuating this fraud on my client remains to be seen,” Alper said. “But we have quite a bit of proof so far.”

Spillane, Adams and Peacock did not respond to phone messages and emails seeking comment. McRae, a real estate attorney who handled the legal side of the deal for South Mack I, said he was commenting on his own behalf.

“The allegations in the complaint are baseless and completely lacking any merit whatsoever,” McRae said. “My conduct was consistent with the law and the requirements of an attorney representing a seller in a transaction like this.”

McRae said his firm was provided with a written consent and an affidavit from 1112 Development confirming the minority partner authorized the sale. His firm also did not receive any funds from the sale to hold in escrow, McRae added.

According to the lawsuit, Michael Bokzam, who’s known Spillane for six years, negotiated two separate deals for the minority partner to lend the ownership entity a combined $425,000 that was used to renovate the warehouses. In exchange, the minority partner acquired a 28 percent stake in the ownership entity South Mack I, whose majority owner is Spillane.

If South Mack I entered into a contract to sell the two buildings, the minority partner 1112 Development had to sign-off on the potential deal, which included Bokzam reviewing all the documents pertaining to a sale, according to an operating agreement attached to the lawsuit. The agreement also stipulated an escrow agent would be responsible for disbursing $425,000 and 28 percent of the sale proceeds to the minority partner 1112 Development.

Spillane and McRae followed the terms of the agreement during a potential sale that fell through last year, but failed to do so when the Excelsior Capital affiliate entered into contract to buy the two warehouses in about September, the lawsuit alleges.

Three months went by without Spillane providing Bokzam with a copy of the sales contract and other documents required for the closing, the lawsuit states.

In early February, Spillane falsely told Bokzam that the sale had still not been completed, even though the deal closed in January unbeknownst to Bokzam, the complaint alleges.