Downtown Dallas’ The National has been hailed as a rare success in the office-to-residential conversion space since developer Todd Interests turned the 55-year-old office tower into a luxury mixed-use building in 2020.
The $450 million conversion is complete, but early investors still have beef with the developer at the helm of the conversion project before Todd Interests bought the tower in 2019.
The investor group is suing San Francisco-based Drever Capital Management, claiming the tower’s minority non-controlling owner misused their investments, according to a lawsuit filed in Texas’ recently established Business Court.
At best, Drever’s actions amount to “woeful mismanagement,” the lawsuit claims. At worst, the firm’s actions point to “an intentional scheme” to defraud the group and cover it up.
Drever purchased the property in 2016. That’s when it started raising funds to update the 51-story office tower, at 1401 Elm Street. CEO Maxwell Drever pledged to spend $240 million converting the tower into 324 apartments and a hotel, the Dallas Morning News reported.
Drever raised $28.3 million from individual investors, including the group that brought the lawsuit.
In 2018, Drever reorganized the entities used to raise money for the redevelopment project. The investors say they weren’t provided proper notice and they never consented to the reorganization.
They called the result “a proverbial spaghetti web of companies” that Drever used to muddle investments.
Drever also refused to provide the documents the investors requested, they claim; the documents that were provided showed that Drever was unequally paying distributions to investors.
The lawsuit also notes that the SEC sanctioned Maxwell Drever in 2021 for misconduct related to the project. Specifically, the SEC found that Drever didn’t tell investors he received millions of dollars in fees. He then reinvested the money and lied about where it came from.
Drever was required to pay back $1.2 million and a $75,000 civil penalty. He was also required to cancel his Class B LLC membership interests and post a copy of the SEC’s order on his website. The order is attached to a now-defunct blog on the website.
The investors who brought the suit are asking for an unspecified amount in damages as well as attorneys fees.
Todd Interests CEO Shawn Todd appeared to hint at Drever’s cash flow issues when he told the Morning News in 2019 that Drever “should be applauded for their efforts and for keeping the property out of foreclosure.”
Noah Drever, who is named in the suit, implicated the property’s current owners.
“The plaintiffs are not happy with their investment that’s been managed by Shawn Todd and his kids over the last five years. I hope we resolve this quickly and efficiently,” he said.
Todd Interests CEO Shawn Todd noted that he and his partners aren’t the subject of any lawsuit from Drever’s investors.
“We and our partners are very pleased with the National and its success within our city,” Todd said. “To that end, I find these comments not only misplaced but inappropriate. Having multiple experiences with Mr. Drever over the last four years and having read the lawsuit against Mr. Drever, we empathize with his financial partners based on what we’ve experienced and what we’ve read.”
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