LAW.COM – AMERICAN LAWYER
Suit is ‘certainly one of the signs of our times: a real estate deal gone bad,’ says one Miami attorney
July 31, 2009
In another chapter of a long-running fight over a failed land deal, attorney Abbey Kaplan is about to hit the road in search of more than $16 million awarded a client over lost profits.
Kaplan represented Downtown Associates in its suit against New Jersey investor Eli Weinstein and his related companies. And while Downtown won the suit, getting paid is the next step in a five-year-old journey that now is likely to take Kaplan to New York, New Jersey and Pennsylvania.
“My suspicion is that his assets are located in the Northeast, primarily in New Jersey,” said Kaplan, a partner in Kluger Kaplan Silverman Katzen & Levine in Miami.
As some investors, sellers and lenders head to court in the aftermath of the implosion of the commercial real estate market, more lawyers could be joining the hunt for money over soured deals.
Downtown Associates’ suit against Weinstein reflects what is happening in today’s marketplace, said attorney Michael Joblove, a partner with Genovese Joblove & Battista in Miami.
“That’s certainly one of the signs of our times: a real estate deal gone bad,” Joblove said.
Joblove, who was not involved in the Downtown-Weinstein case, has seen a surge in business from real estate-related lawsuits.
Joblove and Kaplan both predict more attorneys will be heading out of Florida in pursuit of assets of out-of-state investors who flocked to South Florida during the boom years.
The judgment stems from a lawsuit that began in 2004 when Downtown Associates, led by Miami real estate broker Rodrigo Nino, signed a contract to buy a 1.98-acre parking lot in downtown Miami for $22.25 million.
The sellers of the property at 16 S.E. Second St. were David Stone and the late Guillermo Sostchin.
In August 2005, Nino’s company agreed to sell the purchase contract on the parking lot for $46.5 million to Weinstein’s Nexus Development Group.
Closing was set for October, according to court documents. But Weinstein had trouble coming up with $560,000 for the deposit and delayed the closing three times.
Downtown Associates terminated the contract in January 2006, and soon after, Weinstein sued to force the deal to move forward. The suit was dismissed in early 2008 and Downtown Associates then sued Weinstein to recover the profit it said it lost because of the deal’s many delays.
“The market was so hot crazy that we could have earned at least a reasonable $11 million profit,” said Kaplan, referring to the days when property values were continually on the rise because of speculators.
“But they prevented us from doing that. There was a window of opportunity where we could have sold the property to somebody else; and we didn’t do that because we believed they were going to move forward with the contract.”
Nino got the site re-zoned to allow a mixed-use project designed by noted Miami architect Chad Oppenheim to include twin 50-story towers with 692 condos, 160 hotel rooms, 120,000 square feet of retail space and 80,000 square feet of offices.
Despite the work, Nino’s company never acquired the land. Stone and Sostchin ended up selling to another investor for about $22 million in 2007, according to Miami-Dade property records.
On May 1, 2009, 11th Circuit Court Judge Mark King Leban ordered Weinstein and his companies, Nexus and Pine Projects, to pay Downtown Associates $16.2 million including lost profit, interest and professional fees, according to court documents.
Nino did not return several phone calls for comment. Weinstein could not be reached for comment. No one answered the phone in his New Jersey office, and he didn’t return a call left at his New Jersey house.
In addition to Downtown Associates, Nino is founder and president of Prodigy International, a company with offices in Miami and New York that sells condominiums in South Florida, New York, Panama and Mexico.
As the first step toward going after Weinstein’s out-of-state properties, Kaplan has hired law firms in New York and New Jersey to record the judgment there. He said he may do the same in Pennsylvania.
Kaplan is also targeting properties Weinstein may own in Florida. The lawyer is waiting for several banks to provide financial information Weinstein submitted when he applied for loans that he personally guaranteed, Kaplan said.
Weinstein was very active in South Florida real estate during the boom times, raising millions from investors in the Northeast and investing in New Jersey and other states.
Weinstein and related companies bought four sites in Miami’s Design District early in the decade and planned to build nearly $250 million worth of condo projects.
He borrowed nearly $9 million from Compass Bank, Broadway Bank of Chicago and Builder Financial to buy the land. By 2007, the lenders had launched foreclosure action. Some of the sites were seized by banks and the foreclosures on others are pending.
In 2005, a Weinstein company paid nearly $27 million for One Flagler, a 15-story building at 14 N.E. First Ave. The plan was to convert the 55-year-old building designed by Morris Lapidus into office condos.
Weinstein also acquired the 15-story One Flagler office building in downtown Miami. He has since split from the partnership that owns the office building, which is also facing foreclosure by Mellon United National Bank.
Some of Weinstein’s investors sued in New York and Philadelphia, claiming they invested millions in his ventures but never got the return promised on their investments.
Some of the suits have been settled. He won other suits, but they are now being appealed, said Howard Kleinhendler, a partner with Wachtel & Masyr in New York. He represented Weinstein in several of the lawsuits.
Weinstein blamed his financial troubles on the collapse of the real estate market, Kleinhendler said.
“In all the cases, Weinstein is putting forward a vigorous defense,” he said. “He said investors invested not just in projects but also in his company and when the times were going well, they received very lucrative returns. And then when the market turned, unfortunately, they started pointing fingers.”