Madison Equities sues PMG alleging mismanagement at 10 Sullivan – Maloney says “deal turns 4X, Bob wants more”
Gladstone's firm seeking $30M in damages
Robert Gladstone is really suiting up.
His Madison Equities slapped Property Markets Group and its principal Kevin Maloney with a lawsuit, claiming Maloney intentionally neglected their joint condominium project at 10 Sullivan Street and advanced his own interests at the expense of the partnership, according to court documents filed last month.
Maloney’s firm was responsible for the construction of the 22-unit Soho project, but failed to adhere to project budgets, schedules or basic construction coordination methods, Madison claims. The “intentional neglect” and “gross mismanagement” allegedly resulted in cost overruns totaling more than $20 million and lost sale proceeds of $10 million, according to the suit.
Madison is asking for damages of at least $30 million.
“To deflect blame, Maloney often assumed an obstructive, uncommunicative and argumentative stance seemingly to avoid acknowledging that he treats his own projects with greater care and effort,” Madison alleged in the suit. “Time and again Maloney gave the plaintiffs and the project short shrift.”
A spokesperson for Gladstone downplayed the suit as a simple “construction dispute.” But Maloney didn’t hold back the venom.
“Why should we not suffer the fate of all other Gladstone partners,” he said in a statement to The Real Deal. “I cannot think of a project that Gladstone was involved in that didn’t include litigation or a bankruptcy. Despite Bob’s constant need to control the construction and marketing and the bad decisions that came from that, the partners made a 4X return. I think the partners spent significant amount of time keeping Gladstone’s ego in check. Of course his allegations are frivolous and will be eventually be dismissed.”
Madison and PMG entered the joint venture agreement in 2012 to build the 16-story flatiron-shaped residential building and are 50-50 partners in the joint venture developing the project, which has a projected sellout of $190 million. A PMG-owned construction firm inked a deal to project manage the site in 2014.
During the course of the project, the Department of Buildings stopped work at the project 17 times, resulting in more than 350 days of full or partial work stoppages, Madison claims.
Those delays “account for millions of dollars in carrying costs, delayed sales and increased construction costs,” according to the suit.
The judge issued a temporary restraining order earlier this week, preventing PMG from transferring any proceeds derived from the sale of the remaining units at the project.
Madison and PMG recently sold a 5,503-square-foot, five-bedroom penthouse at the project for $25 million. According to a representative for PMG, all but two units are unsold — a townhouse and a full-floor residence.
Madison noted in the lawsuit that this is not the first time Maloney and his firm have been accused of misconduct. PMG was previously a defendant in a case brought by AmBase Corp., a publicly traded real estate company, which claimed that the firm and its partners had schemed to dilute AmBase’s equity interest in a condo project at 111 West 57th Street.
Meanwhile, Madison is locked in another legal battle with brokerage Town Residential over the exclusive contract to market units at another of its projects – the condo conversion at 212 Fifth Avenue. He filed a $100 million libel suit against Town CEO Andrew Heiberger on Thursday.