An ongoing partnership spat between two top executives at Arch Companies has triggered chaos inside the once promising up-and-comer in New York City real estate.
Arch’s Jeffrey Simpson and his partner, Jared Chassen, have accused each other in a New York lawsuit of misappropriating money and have attempted to fire each other. On top of the internal disputes, Arch’s bank was unclear on who has authority at the company and a judge has advised the partners to work together to bring the firm to solid footing.
Simpson claims he was a victim of a coup, alleging his partner attempted to fire him and cut off his access to bank accounts and emails before locking him out of their office in Greenwich Village in early August. But Chassen claims there was no coup; rather, he was forced to fire Simpson in retaliation for his self-interested decision making and Simpson’s own ill-advised firing attempt.
Partner vs. partner
Chassen and Simpson started Arch Companies in happier times.
The two worked together at Greystone, where Simpson led the firm’s development business. They launched Arch in 2017, before it grew to $1 billion in assets. The firm’s projects have included a 17-story commercial and residential building in Ridgewood, Queens, a high-end residential project at 11 Greene Street in Soho, and acquiring a Greenwich Village office building co-owned by Adam Neumann.
Trouble began to surface at the firm last year. Arch made money from acquisition fees, but rate hikes by the Federal Reserve led to fewer deals and the firm instead relied on fees from its property management arm, according to a court filing.
Arch also had a penchant for lawsuits and expensive lawyers. The firm sued its partner at 11 Greene Street, claiming it owed Arch money. At its Ridgewood project, Arch sued partner Meir Babaev, alleging Babaev misrepresented the status of the development.
In Flatbush, Arch won a Uniform Commercial Code foreclosure auction, which usually provides a lender a clear path to possession. But it alleges the owner, Eli Karp, entered a lease with another company without its consent and Arch is still in litigation as legal bills pile up.
Arch’s main investor, 35 Oak, took issue with Simpson’s leadership or the hefty legal costs it had to pay. The Toronto-based firm alleges it was a guarantor of some of Arch’s loans, but Simpson kept them in the dark and threatened to fire all Arch employees unless Oak provided more money, according to a lawsuit the investor filed in federal court.
Simpson argued he has control of the company, not 35 Oak.
“You are the funding partner! That is your only role in this business — to write checks and provide guarantees,” Simpson wrote in one email, attached in the federal lawsuit.
The tension between 35 Oak and Simpson only got worse, according to Chassen.
Chassen alleges in the New York suit that Simpson said if 35 Oak “didn’t stop messing” with him he would force properties into bankruptcy and “blow the company up.”
Roles on fire
Things came to a breaking point in early August, when Chassen alleges he confronted Simpson about his decision making and misappropriation of money. On August 5, Simpson fired Chassen.
Simpson has a different version of events.
Simpson argues in the suit he fired Chassen because the second-in-command refused to take a necessary pay cut. He also alleges he discovered that Chassen instructed First Republic Bank to remove him as an authorized signatory.
On August 6, Chassen attempted to fire Simpson, using rights he had under an operating agreement. Investor 35 Oak also told Simpson he breached his fiduciary duties.
A judge’s order returned Simpson to the company, but instructed the partners to “cooperate with each other in good faith to facilitate the effective exercise of their respective roles.”
Instead, Simpson again fired Chassen, who was returned to Arch by the judge in mid-September.
“I’m really kind of flabbergasted by this,” New York Judge Joel Cohen said of the firing at a recent hearing. “I don’t get surprised by too many things.”
The back-and-forth does not appear to have an end in sight: A lawyer for Simpson recently told the court the only conversation he would have is about Chassen’s exit.
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“It doesn’t make any sense after someone tried stabbing you and ruining your company to let them back in,” said attorney Adam Leitman Bailey at a hearing.
But the judge said his goal is for the two of them to resolve their issues.
“I’m going to get frustrated by all of this, if I’m constantly being called in to handle what sound like somewhat immature squabbles,” said Cohen.