TriStar Capital sues JSRE to get back $2M deposit in failed purchase of Lincoln Road building
New York-based TriStar Capital has sued JSRE Acquisitions to get back its $2 million deposit on a failed deal to buy a building on Miami Beach’s Lincoln Road.
The suit, filed in Miami-Dade Circuit Court, alleges that New York-based JSRE, tied to Brazilian billionaire Joseph Safra, breached its sales contract by failing to remove three open violations on the property at 716-720 Lincoln Road.
The litigation also sheds light on the demand for property on popular Lincoln Road, where Spanish billionaire Amancio Ortega paid $370 million for an entire block in 2015.
According to the suit, a TriStar affiliate, 718 Star, entered into an agreement to buy 716-720 Lincoln Road from JSRE on Feb. 1 of this year. The contract required David Edelstein’s TriStar to close on the sale by April 1, but allowed TriStar to extend the date by 30 days, which it did, to May 1.
But the deal required JSRE to “remove, discharge and cure” all open violations related to the property on or after Feb. 1, the suit alleges. If either party failed to satisfy any condition prior to closing, the party obligated to close could then either waive satisfaction of the condition and move to close, terminate the agreement, or declare the party who failed to satisfy the condition in default of the agreement, according to the suit.
On May 1, TriStar and JSRE amended the contract to set a closing date of May 10, but allowed TriStar the right to extend it further to June 10 and even June 22 if TriStar gave JSRE a commitment letter for financing the purchase, the suit said.
In keeping with the amended contract, TriStar’s $2 million deposit toward the purchase that was held by an escrow agent was released JSRE on May 2, according to the suit.
On June 1, TriStar told JSRE that it was exercising its right to extend the contract to June 22 and provided the loan commitment for the financing. But on June 22, TriStar discovered through a public records search that the city of Miami Beach had cited three violations against the property, which JSRE never disclosed, according to the suit.
JSRE told TriStar that it was working to correct the violations. So on June 22 at 4:45 p.m., JSRE gave TriStar a “Mandatory Removal Violations Agreement” that said the violations remained outstanding as of the closing date, that it was still trying to get them removed but that it was unable to prior to the closing but would remain obligated to discharge the violations “within a reasonable amount of time after the closing,” according to the suit.
But at 5:07 p.m., JSRE allegedly changed its position regarding the violations and said it no longer had an obligation to remove them. It “shifted the blame and responsibility” to the tenant occupying 718 Lincoln Road, the suit said. Then, at 5:35 p.m., JSRE changed its position again, saying that the violations were immaterial to the scope of the sale, and threatened to declare TriStar in default if was unwilling to close the deal, the suit said.
The next day, on June 23, JSRE notified TriStar that it was in default and exercised its right to terminate the agreement, keeping the $2 million as damages resulting from the failure to close the sale, the suit said.
TriStar alleges that JSRE breached the sale agreement by failing to remove the violations, preventing the closing. Because the violations were open, TriStar could not close the deal, it alleges. It is now seeking to terminate the sale agreement and get back its $2 million deposit.
The suit further alleges that when JSRE realized it could not cure it default due to the open violations, it “chose to manufacture” a default so it could claim it was entitled to the deposit.
A spokesperson for JSRE responded to The Real Deal with a statement, “The allegations in this complaint regarding a routine business dispute are frivolous and we will defend ourselves vigorously.”
Robert Zarco, senior partner with Zarco Einhorn Salkowki & Brito, who represents TriStar, told TRD, “We hope and anticipate that there will be an amicable resolution to this dispute,”
A sale price was not disclosed in the suit. Sources have said asking prices for buildings on Lincoln Road have reached as high as $5,000 a square foot, which could put the price at $37.5 million. Ortega’s purchase was at $4,933 a square foot.
JSRE paid $34.5 million for 716-720 Lincoln Road in May 2014. It bought the 7,500-square-foot property from Thai Investment Group of Miami, led by Ronald Felton. That entity had owned the site for 21 years before selling it to JSRE. The building was originally constructed in 1936. American Apparel is currently a tenant at 720 Lincoln. 716 is a vacant space that was previously leased to Cache.
Source: The Real Deal