Investors who sold waterfront land to the Related Group for its Icon Marina Village development in West Palm Beach sued the condo developer, alleging they were cheated out of an agreement that would have given them nearly $13 million.
Stephen and Louise Kornfeld, and Jody Weissman filed the lawsuit against TRG North Flagler Venture and RD IMV Owner, affiliates of Miami-based Related. The three investors sold the site at 4334 North Flagler Drive to Related in 2005, property records show.
The planned 24-story, two-tower, 399-unit development is within a master-planned 19-acre assemblage where an additional 650 units could be built, near the superyacht marina that Wayne Huizenga Jr. sold last year to Safe Harbor Marinas.
In a complaint filed this month in Miami-Dade Circuit Court, the Kornfelds and Weissman allege that Related fraudulently transferred its assets from TRG North Flagler Venture to RD IMV Owner to avoid paying them. The lawsuit centers on the way the partners and Related structured the sale.
Related’s TRG North Flagler took over the site and paid off the sellers’ $3.4 million mortgage. The entity also made a partial cash payment to the sellers, and agreed to give them a cut of future cash flow generated by the sales of the condo units, according to the complaint. Through a promissory note, TRG North Flagler would make back-end payments of at least about $1.2 million, plus 8 percent interest, and up to about $3.7 million, plus 8 percent interest, if the project’s sales approached $100 million.
In the complaint, the sellers’ attorney, Jason Kellogg of Levine Kellogg Lehman Schneider + Grossman, states that his clients had “declined to pursue lucrative, up-front cash transactions with other reputable buyers” — to instead work with Related.
Related broke ground on the luxury rental project last year, records show. The developer tapped Balfour Beatty to handle construction. Related’s RD IMV Owner also closed on $95 million in construction financing from Santander Bank last year. The project sits on a 5-acre site and will include a shared courtyard with a pool and beach club.
“In an attempt to avoid paying Plaintiffs the nearly $13 million they are owed under the Note, Related has secretly and fraudulently transferred the project’s assets to a new single-purpose entity,” the complaint alleges. “It has also changed the project from condominium units to rentals, cutting off the source of repayment as set forth in the Note.”
Matt Allen, executive vice president and COO at Related, signed the note, which is dated June 2005. Half of the proceeds were owed to Weissman and half to the Kornfelds, according to the agreement.
A spokesperson for Related declined to comment.
The luxury residential market for condos and homes, as well as rentals, has boomed in West Palm Beach, and Related has been expanding in the city. In November, Related and billionaire Teddy Sagi’s Globe Invest, along with their partner BH Group, formed a joint venture to invest in developer Michael Masanoff’s Transit Village, a $500 million, 10-acre project planned for the western side of downtown West Palm Beach.
Related, led by billionaire Jorge Pérez and his sons Jon Paul and Nicholas Pérez, had previously shied away from Palm Beach County, where New York-based Related Companies has a big presence. Related Cos. is led by billionaire Stephen Ross, who owns a minority stake in Related Group. Both firms are expanding rapidly in South Florida.