Kushner Counters Investor in Brooklyn Heights Squabble

The Kushner Companies is striking back against a lawsuit by an investor alleging mismanagement of a Brooklyn Heights portfolio.

Kushner filed a motion to dismiss a complaint against the firm and CEO Laurent Morali brought by investor BLS Holdco in June, Crain’s reported. A memo attached to the motion described the lawsuit as a “misguided attempt to shake down” the firm.

Kushner said the lawsuit should be thrown out because the firm didn’t have the fiscal responsibility to the investor that BLS claimed it had. The firm added that BLS didn’t adhere to the statute of limitations in Delaware, where the investor is based, which would’ve required the lawsuit to be filed in 2021 based on BLS’ timeline of alleged events, which ends in 2018.

The dispute centers on six former Brooklyn Law School dorms Kushner and BLS acquired in 2014 for $36.5 million. At the time, Kushner planned to convert half of the properties into luxury single-family homes and rent out the other three as apartment buildings.

But BLS alleges Kushner’s performance on the townhouses wiped out the investor, dragging the net asset value of the multifamily properties close to zilch.

The investor claimed in the suit Kushner said only seven of the 77 units in the three buildings were subject to rent stabilization; it alleged Kushner didn’t re-register the other units after renovations, leaving them omitted from deregulation under the rent laws of the time, which have since changed.

Kushner agreed in 2018 to pay tenants at one building after being sued for overcharging rents and deregulating units. Since then, other tenants within the portfolio have gone after the firm.

“At no time and in no manner, not even in investor disclosures of potential ‘deal risks,’ did Kushner raise the possibility that the remaining 70 units could be subject to rent stabilization,” the lawsuit states.

BLS declined to comment to Crain’s on Kushner’s dismissal motion.

— Holden Walter-Warner