(Bloomberg)—A group of investors in Starrett City, an affordable housing complex in Brooklyn that counts President Donald Trump as a stakeholder, sued the owners in an attempt to block a proposed sale of the property for more than $900 million.
The group of limited partners in the 153-acre complex, which opened in 1974 and is now named Spring Creek Towers, claim the managing general partners are seeking to sell the property for "far less than market value" and entertained only one offer while ignoring a superior deal.
The sale is being done "in a hasty and opaque manner that is riven with conflicts of interest," the investors said in the lawsuit, filed Thursday in New York state court. The plaintiffs are led by the children of the second wife of financier and real estate investor Disque D. Deane, who led the development of the complex in the 1970s. Deane controlled the group that owns the complex until he died in 2010, when control passed to his third wife, Carol, according to the lawsuit.
The owners of the complex on Sept. 6 announced the deal to sell the property to a joint venture led by Brooksville Co. for about $850 million. The buyers said in a court filing Thursday that the actual price is $905 million.
The property, the largest federally subsidized housing complex in the country, according to the lawsuit, is home to 15,000 residents living in 5,881 apartments. The complex of 46 buildings spans Pennsylvania Avenue just north of the Belt Parkway. Trump is a limited partner in Starrett City Associates, with a 4 percent stake, according to a financial disclosure filing made in June with the U.S. Office of Government Ethics. He received more than $5 million in income from the property in the past year, according to the filing.
New York State Supreme Court Justice Saliann Scarpulla on Thursday declined a request to issue an immediate order blocking the sale from going forward, saying the suing investors failed to show why emergency relief was warranted when the deal is subject to approval by state and federal regulators.
One of the plaintiffs, an entity owned by the San Francisco-based investment firm Belveron Partners, said their offer -- made after the deal was announced -- to purchase the property for $905 million was ignored. So was a subsequent offer to buy it for $25 million more than the buyers had agreed to, Belveron said.
Anthony Paccione, an attorney representing the complex owners, said in court that the deal only has to be approved by more than half of the ownership group’s limited partners and already has the consent of 65 percent. The only hurdle left is approval by state and federal regulators, he said.
"They’re just trying to muck up the works in order to get this deal for themselves," Paccione told the judge.
Gregory A. Cross, an attorney representing the buyer, said the governmental approval process has begun and is expected to take 90 to 150 days. The buyers are worried the court proceedings might delay the government approvals, he said.
The case is Deane Jr. v. Starrett City Inc., 656087/2017, New York State Supreme Court, New York County (Brooklyn).
--With assistance from Oshrat Carmiel.To contact the reporter on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at [email protected] To contact the editors responsible for this story: David Glovin at [email protected] Joe Schneider, Elizabeth Wollman
COPYRIGHT© 2017 Bloomberg L.P