Witkoff, Monroe sued over alleged “crooked and secretive land grab” of Shore Club in South Beach

Former partner with HFZ alleges Monroe conducted illegal UCC foreclosure of the oceanfront hotel

From left: Witkoff’s Steve Witkoff and Monroe Capital’s Theodore Koenig with the Shore Club
From left: Witkoff’s Steve Witkoff and Monroe Capital’s Theodore Koenig with the Shore Club (Monroe Capital, Witkoff, Shore Club, Getty)

UPDATED, July 25, 5:50 p.m.: A former owner of the Shore Club in South Beach sued developer Witkoff and its financial backer on the project, Monroe Capital, alleging it was illegally cut out of its share of ownership in the oceanfront property through a “crooked and secretive land grab.”

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An entity tied to The Clark Estates, the family of the late newspaper publisher and businessman Stephen Carlton Clark, is seeking at least $125 million in damages, which is the amount it expected to receive from a previously planned project on the site. SC Philips Clark LLC filed the lawsuit in New York this week, as first reported by Commercial Observer. It adds to a slew of lawsuits that have involved the Art Deco hotel.

The complaint alleges that Steven Witkoff, who heads the New York-based firm, “appears to have hatched and orchestrated the scheme” to ultimately erase SC Philips Clark’s interest in the Shore Club, a 3-acre property at 1901 Collins Avenue. The lawsuit claims that Witkoff and Monroe violated the profit participation agreement that was put in place to safeguard SC Philips Clark’s stake.

A spokesperson for Witkoff said the lawsuit is “baseless.”

“We will defend it vigorously and we remain highly confident that it will ultimately be dismissed,” according to the spokesperson’s statement.

Witkoff and Monroe are working on plans to renovate and redevelop the Shore Club into a luxury condo and hotel complex. The historic hotel was built in 1939 and redesigned by architect David Chipperfield in the early 2000s, when hotelier Ian Schrager reopened it as a Morgans Hotel Group property. It’s been closed since the pandemic began.

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An affiliate of SC Philips has owned the hotel for years. Fortress and HFZ Capital Group joined SC Philips in 2013 to redevelop the property into a luxury condo and hotel, according to the complaint. HFZ’s plans to do so fell apart when the condo market slowed down in 2018, forcing it to cancel the planned Fasano-branded project and return buyers’ deposits. New York-based HFZ would later face a litany of issues in New York, as well, including at the Bjarke Ingels-designed Xi development.

Monroe acquired HFZ’s interests in the Shore Club entities that owned the property in 2020, and partnered with Witkoff to lead the redevelopment of the site.

“Monroe and Witkoff then targeted Plaintiff’s interests — interests that were not theirs to take,” the complaint alleges, claiming that the alleged scheme “unfolded systematically.”

Shore Club Mezzanine Lender LLC, which SC Philips Clark refers to as a “Monroe alter ego,” conducted a UCC foreclosure with Monroe on both sides of the deal, foreclosing on itself, according to the complaint. SC Philips Clark said it found out that Monroe and Witkoff were the new owners after The Real Deal reported on their plans for the property, five months after they acquired control last year.

Monroe and Witkoff relied on “disinformation, and [conducted] a series of sharp-elbowed, unscrupulous maneuvers — including clandestine property assignments, a collusive U.C.C. foreclosure, and selectively and misleadingly withholding critical information from courts in both New York and Florida,” according to the complaint.

In addition, Monroe and Witkoff “exploited the downfall” of HFZ to take control of the entity that SC Philips Clark had made its deal with, SC Philips Clark claims in the suit.

An affiliate of the Clark Estates sued the HFZ-tied LLCs that owned the Shore Club last spring to stop the sale of the hotel. Fasano, the luxury Brazilian hospitality brand that HFZ brought in to redesign the former project, also sued for over $6 million. In a rare win for HFZ, a judge ruled in favor of the developer in that case last year.