Investors Sue OKO Group Over Fort Lauderdale Rental Project

Vlad Doronin’s OKO Group was hit with a lawsuit over its stalled 251-unit apartment project in downtown Fort Lauderdale.

More than 40 investors in OKO’s planned 34-story One River tower say that the developer has failed to advance any “meaningful construction” and is yet to secure a general contractor, three-plus years after obtaining a nearly $100 million construction loan to build the tower, according to the complaint.

The investors sued OKO Group, as well as FPR Investor, the entity in which investors purchased a membership interest, and FPR US 1, the sponsor manager of FPR Investor. London-based Cain International is a co-developer of One River, but wasn’t named as a defendant in the suit.

The lawsuit, filed last month in Broward County Circuit Court, lists fraud and breach of contract counts.

Starting in 2021, each investor put in $25,000 to $400,000 in the project by purchasing securities in FPR Investor, which targeted a $21 million minimum raise, according to the complaint. The investments were to be held in an escrow account with FPR US 1.

“FPR has been nothing more than a vehicle to raise money from investors and enrich defendants,” investors allege in the suit, adding that their capital hasn’t been returned to them.

In a statement, OKO denied the claims in the suit as “false and without merit,” and said it intends “to defend vigorously against them in court.”

Cain did not respond to a request for comment.

In 2022, OKO Group and Cain, led by Jonathan Goldstein, scored a $97.2 million construction loan for One River at 629 Southeast Fifth Avenue. Bank OZK was the senior lender and JVP Management provided the mezzanine debt.

Construction was expected to start in the summer of 2022, and be completed last September, according to an OKO news release announcing the financing in 2022.

Records show that the development entity took out two notices of commencement of work in 2022 on the site, one for excavation and one for piling. No other commencement notices were recorded.

OKO Group had bought the site as part of its $63 million purchase of a larger 6.7-acre assemblage south of the New River in downtown Fort Lauderdale in 2020. One River was marketed as the first tower in a multi-phase development.

According to the suit, some of the investors financially backed One River through CrowdStreet. The New York-based crowdfunding platform faced heavy criticism after real estate investor Elie Schwartz pleaded guilty this year to wire fraud tied to diverting nearly $63 million of investor funds meant for Atlanta and Miami Beach offices for his personal use.

For more than three years, OKO Group has given regular updates on One River, according to the lawsuit. Its first quarter report showed the firm is continuing the same work that it reported in past updates, the lawsuit says. This includes putting forth general contractor bids for price feedback, and continuing talks with general contractors and construction management firms over the site and pricing. Yet, OKO still hasn’t secured an “actionable” guaranteed maximum price from a general contractor, according to the complaint and the first quarter report.

OKO and Cain have partnered on other projects across South Florida. The pair completed the fully leased 57-story 830 Brickell office tower in Miami’s Brickell last year. The building attracted many new-to-market companies that moved to South Florida in the past half decade.

In Palm Beach, OKO and Cain propose a condo complex with three five-story buildings. The project will replace the Ambassador Palm Beach Hotel & Residences at 2730 South Ocean Boulevard and Edgewater at 2720 South Ocean Boulevard. While OMA architect Jason Long confirmed the Aman brand’s affiliation with the project at a Palm Beach Architectural Review Commission meeting, OKO Group has strongly denied an affiliation between Aman and the project.

The lawsuit comes as South Florida’s multifamily market has slowed compared with the boom of recent years. The influx of out-of-staters had prompted unprecedented apartment demand and rent growth, and developers seized on the bonanza by quickly building new projects.
More recently, the construction frenzy has led to an apartment supply overhang, resulting in slower lease-ups and rent growth. Asking rents are either flat or declining across South Florida submarkets. For the past year, developers have been canceling or pausing their multifamily projects amid elevated interest rates and higher construction costs.