Big-Time Fight Over St. Regis Retail; Chera Cries ‘Conspiracy’ in Lawsuit
Dana Rubinstein Nov. 10, 2009, 3:16 p.m.
Crown Acquisitions chairman Stanley Chera, owner of 15 million square feet of real estate, may have recently added a few of New York’s most valuable retail properties to his portfolio: three exclusive Fifth Avenue storefronts occupied by Bottega Veneta, Pucci and De Beers. But that hasn’t stopped him from accusing his onetime business associates of a Machiavellian “civil conspiracy” to cut him out of the group that was initially vying for ownership of the coveted retail space.
Mr. Chera has filed, not one, but two lawsuits against the Jackson Group’s Jack and Ike Chehebar; landlord Jeff Sutton; landlord Alex Adjmi; and developers Bobby and Stan Cayre. He alleges the aforementioned “civil” conspiracy, along with breach of contract, fraud, breach of fiduciary duties and the like. The first lawsuit, filed on Aug. 10, was voluntarily withdrawn the following day. The second lawsuit was filed on Aug. 27, and expanded upon in a lengthy complaint filed Oct. 13.
Perhaps it was inevitable that one of the few transactions of note in this ugly real estate environment should engender so much ugliness. Common sense would dictate that where there is scarcity of investment opportunities, conflict ensues.
In the shell-shocked spring of ’09, Ike Chehebar apparently created his own opportunity, approaching Starwood Hotels & Resort, the owner of the St. Regis Hotel and the adjoining retail condo, about purchasing the storefronts, according to Mr. Chera. The storefronts were not on the market, though following Mr. Chehebar’s approach, Starwood hired CB Richard Ellis’ mercurial investment chief, Darcy Stacom.
Starwood agreed to negotiate, provided Mr. Chera join the investment team to give it some professional heft, according to the suit. Together, they formed C&C Fifth Avenue LLC, “for the sole purpose of acquiring, leasing, financing and managing the Retail Condominium.” Messrs. Chehebar and Chera signed a June 10 letter of agreement. Mr. Chera asserts that he complied with all aspects of that agreement, while the Jackson Group et al. did not.
The investment group, which ultimately came to include Messrs. Sutton, Adjmi and Cayre, offered to pay $130 million for the property, according to the suit. Starwood accepted.
And then the defendants asked Mr. Chera to leave, offering him a $2.5 million exit fee, he claims in his lawsuit. He agreed. But, he says, they never paid him. Meanwhile, according to the purchase agreement, C&C had to make a $15 million deposit by Aug. 11. But, says the suit, “Defendants failed to deposit the funds as they had promised and as they were obligated to do.”
Why would they do such things? Enter Machiavelli.
“Defendants understood that they could learn valuable information about Starwood, Starwood’s pressure points, and, ultimately, how to leverage the best deal for themselves with Starwood, if they were on the inside of the joint venture with Plaintiff,” Mr. Chera’s suit claims. “They also knew that they could benefit tremendously from Plaintiff’s industry expertise as well as from the fruits of Plaintiff’s labor.”
No response has yet been filed in that case.
But in a response of another sort, on Oct. 6, the Jackson Group LLC filed a countersuit against Crown Acquisitions, making startlingly similar allegations: to wit, that Crown violated the terms of the June 10 agreement, which supposedly gave all decision-making authority to the Jackson Group, and that Mr. Chera cut Jackson Group’s principals out of the deal. They’re seeking at least $30 million in damages and an injunction against the closing of the purchase.
They didn’t get that last demand. Mr. Chera, partnering with the Feil Organization and Lloyd Goldman, closed on the purchase of the retail condominiums on Nov. 4 for $117 million. A valedictory press release announcing its closure was released the following day.