Developer Comstock and its Japanese partner disagree on how much each entity owns BLVD Reston Station, a prominent luxury apartment building in Reston, a suburb of Washington, D.C.
Tokyo-based multifamily developer and asset manager Daito Trust Construction sued Comstock over the ownership dispute at 1908 Reston Metro Plaza, a 448-unit building within Comstock’s larger Reston Station development, the Washington Business Journal reported. The complaint was filed in U.S. District Court last week.
Several entities of Comstock and Comstock Holdings CEO Chris Clemente are named as defendants. A spokesperson for Comstock denied the allegations and said the company anticipates it will “resolve any differences we may have outside of judicial proceedings.”
Daito claims the joint venture partnership was 50-50, with each company ultimately laying out $41.5 million each for the project, according to the complaint. The development was completed in 2016.
At that point, an alleged cash flow deficit necessitated additional capital contributions. The partners changed their arrangement so Daito wouldn’t share in the costs, according to the complaint. In exchange, Daito would either commit $40 million to other Comstock assets or have its ownership share in the original joint venture reduced.
Daito seemingly didn’t commit the $40 million to other assets, leading Comstock to reduce the Japanese company’s ownership share to 30 percent. Daito, however, alleges that Comstock didn’t present suitable co-investment opportunities, claiming one of the two opportunities brought forth was in a sector Daito didn’t dabble in; the company believes its joint venture share should be 40 percent.
Daito further alleges the development didn’t reach benchmarks in 2019 regarding net operating income, cash flow leases, occupancy rate and average rents. Comstock allegedly “inflated” the property’s net operating income.
Daito is seeking at least $10 million in damages and interest, attorney fees, court costs and “other losses as proven at trial.”
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