East End Capital claims it’s being stiffed of more than $1.8 million by its Australian investor in a downtown Miami office tower that they once jointly owned.
It’s the latest chapter in the acrimony between the former partners in the building. Litigation started in January 2021 and continues a year after they sold the property.
Late last month, Jonathon Yormak and David Peretz’s East End sued Melbourne-based 100 & 130 Biscayne LLC, led by Errol Dorfan and Kim Davis, in state court in Manhattan. According to the complaint, the Australian entity refuses to release from escrow nearly $1.2 million due to an East End affiliate for overseeing the day-to-day business operations of the tower, and $674,000 due to Talpiot, another East End affiliate, for property management.
After the partners sold the 30-story office building and adjacent garage, at 100 and 130 Biscayne Boulevard, in January of last year, they put the proceeds in escrow. Aby Rosen’s RFR Holding bought the property. Records show the price was $81.1 million, while sources told The Real Deal it was roughly $90 million.
Under the escrow agreement, sale proceeds cannot be released unless both East End and the Australian entity sign off. Though each side got an equity disbursement from the account, the Australian investor refuses to allow the release of fees owed to East End’s entities for managing the tower, the lawsuit claims.
Yormak declined comment, and 100 & 130 Biscayne’s attorneys didn’t return a request for comment.
The partnership didn’t start awry. In 2016, they bought the property for $84 million, betting on a windfall from improvements, increased occupancy and the eventual sale of the tower. Dorfan and Davis footed most of the bill for the purchase and capital improvements, or roughly $28 million, giving them an 80 percent stake in the property. East End, though a minority partner, was the property and business operations manager, in exchange for a fee to be paid by the ownership entity.
In 2019, Dorfan started getting suspicious. “You have to question how well you have been managing the asset?” he wrote in an email to Yormak, court filings show. “You appear to have been chasing construction management fees instead of looking after your investors first.”
Dorfan and Davis, through their 100 & 130 Biscayne, first sued East End’s affiliates in 2021 for $50 million in damages. They alleged that the New York-based firm misled them to bankroll the venture and then botched oversight of the property. While 100 Biscayne turned into a money-loser, East End, Yormak and Peretz pocketed roughly $2 million in management fees, according to the complaint.
In court, East End’s attorney argued it’s “farcical” to claim that East End, Yormak and Peretz “sabotaged” their own project and reputation just to “chase” $2 million.
East End also argued in court that revenue projections weren’t met because the biggest tenant converted its allowance into a free rent credit, two large tenants were evicted because they didn’t pay rent, and two additional big tenants didn’t renew their leases, filings show. Other issues included two fires at the garage and impacts from Hurricane Irma in 2017.
Judge Joel Cohen dismissed the Australians’ lawsuit in January of last year. Dorfan and Davis’ affiliate wasn’t utterly dependent on East End’s representations about the business plan, as the joint venture was an “arm’s-length deal” between sophisticated parties, Cohen wrote in his order. As a majority partner, the Australian investor “bargained for muscular decision-making authority” in the joint venture agreement and had the right to override and control major decisions about the tower, Cohen wrote.
An appeals court upheld the dismissal, except for two counts raised by the Australian investor: breach of contract by East End, and a push to remove East End from managing the day-to-day business of the tower.
Based on 100 & 130 Biscayne’s lawsuit allegations, it could be “inferred” that East End’s affiliate’s “actions constituted willful misconduct or gross negligence,” the appeals court wrote in its December ruling.
East End’s most recent suit over the disbursement of business and property management funds from escrow is a counterclaim to the Australian investor’s original suit. The $1.2 million due in asset management fees represents amounts not paid to East End’s affiliate from 2019 to 2022, according to the counterclaim. The $674,000 are property management fees, as well as costs of construction management and reimbursements for labor and supplies. They weren’t paid to East End’s Talpiot from 2019 to 2020, when the property manager canceled its contract for 100 Biscayne, according to the counterclaim.
The Australian investor hasn’t signed off on releasing the money because it still has pending claims against East End, the counterclaim says.