Hedge fund Alden Global Capital’s real estate division allegedly tried to shortchange a former property manager and investor in his payout for South Florida hotels and warehouses, as well as a larger nationwide portfolio, according to a recently filed lawsuit.
Joseph Miller, who managed the portfolio and held equity in it, sued Alden’s Stamford, Connecticut-based real estate arm Twenty Lake Holdings and Blue Suede Charlottesville Management, an affiliate of New York-based Blue Suede Hospitality Group.
West Palm Beach-based Alden is a billion-dollar hedge fund co-founded by Randall Smith. It’s a subsidiary of his Smith Management. The hedge fund invests in newspaper businesses and is one of the largest U.S. publishers, owning Tribune Publishing, as well as real estate.
According to the lawsuit, filed last week in Delaware court, Miller started working for Smith in 2011 to oversee real estate for the newspapers Smith owned, helping him turn the business into a “massively successful” venture that was spun off into Twenty Lake. Miller eventually became a minority equity partner with a 10 percent stake in Twenty Lake and a 3 percent stake in two Blue Suede hotels in Miami Beach and Charlottesville, Virginia.
After Smith and Miller parted ways last year, Twenty Lake offered Miller $3.5 million for his stake in the portfolio, and Blue Suede’s affiliate offered him a “not remotely credible or appropriate” $2 for his stake in the two hotels, according to the complaint. This, even though they had an agreement that Miller’s stake would be paid at “book value,” or the most recent valuation of the portfolio, the complaint states.
“At Smith’s behest, [the companies] have tried to buy out Miller’s equity interests at bogus, fire-sale prices, contrary to the clear requirements of the applicable contracts,” the complaint says.
Miller’s attorney, Charles Michael, declined to comment.
The amount Miller is owed for his Twenty Lake equity could be more than $15 million, based on an August valuation of 88 properties in the portfolio. He actually could be owed more than $26 million based on third-party appraisals of Twenty Lake, according to the suit.
In total, the Twenty Lake portfolio spanned 10 million square feet as of October, according to the complaint. South Florida properties include the five-building industrial complex at 601 Roseland Drive and the warehouse at 1100 25th Street in West Palm Beach, as well as the four-building industrial campus at 8011 Monetary Drive near Riviera Beach.
Twenty Lake bought the 601 Roseland Drive property for $15 million last year, and the 1100 25th Street building for $12.2 million in 2022, records show. The firm paid $17.2 million for the buildings at 8011 Monetary Drive last year.
Blue Suede’s hotels include the Aloha Fridays Resort at 952 Collins Avenue, Pantera Rosa at 1415 Collins Avenue, the Daydrift at 2216 Park Avenue and Beach Plaza Hotel at 1401 Collins Avenue, all in Miami Beach. Miller’s lawsuit only disputes his payout for the Daydrift hotel in Miami Beach and the Doyle in Virginia.
Blue Suede paid $12.8 million for the Daydrift hotel in April, records show.
The hotel’s net operating income projection for this year is $1.4 million and the Doyle’s is $2.8 million, with further increases expected next year, according to the suit.
“Even at a conservative capitalization rate, these projections imply significant equity value,” the complaint says.
When Smith told Miller last year that it’s time for them to part ways, Smith didn’t say Miller was terminated for cause or wrongdoing, suggesting they can work together in the future, according to the suit. Miller has inquired and discussed the proposed payouts with Christopher Minnetian, president of Alden Global parent company Smith Management.
“Minnetian has explicitly told Miller that Smith would under no circumstances overpay Miller ‘by a dime’ on the properties, which conveyed the message to Miller that … Smith has a predetermined amount (or perhaps a range) that he is willing to pay, and that the valuation process is not focused on actually determining value,” the suit says.
Minnetian declined to comment.
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