Invsco, developer sue each other over Lincoln Park condo project
(Crain's) — American Invsco Realty Inc. was dismissed as the broker for a proposed luxury condominium project overlooking Lincoln Park in part because the company propped up sales by making undisclosed loans to buyers for deposits, according to documents in a court case filed by Invsco challenging its firing.
The allegations by an affiliate of Ricker-Murphy Development LLC emerged publicly after Invsco sued last month to prevent its termination from the 250-unit project. The development at 2520 N. Lakeview Ave. would replace the shuttered Columbus Hospital.
Rendering of condo tower proposed for 2520 N. Lakeview Ave. |
In a bid to boost the project's sales to meet a key benchmark, Invsco submitted 20 sales contracts in which Invsco lent prospective buyers the money for earnest money deposits, the court documents reveal. The Ricker-Murphy venture alleges that the arrangement was fraudulent, an allegation Invsco denies.
Mr. Gouletas "did disclose the all the terms and conditions, including the fact that an (American Invsco) affiliate had advanced the earnest money," Peter Baugher, an Invsco attorney, said at a June 6 court hearing, according to a transcript.
Mr. Gouletas "believes these are good sales that the developer ought to go forward with," Mr. Baugher, a partner in Chicago law firm Schopf & Weiss LLP, said at the hearing. "And if the developer had accepted those sales, they haven't — they rejected them — but if they had accepted them, more than 50% of the units would have been sold."
At the hearing, an attorney for the Ricker-Murphy venture said the arrangements weren't disclosed until the development venture questioned the contracts.
After the hearing, Cook County Circuit Court Judge Mary Anne Mason denied Invsco's motion for an order preventing its termination. The judge did not address the merits of Invsco's case but said an award of money damages would be an adequate remedy if Invsco prevailed.
Ricker-Murphy last month replaced Invsco with Chicago-based rival Rubloff Residential Properties.
Related story: American Invsco replaced as broker on project
Judge Mason also did not address the merits of the fraud allegations, but she expressed some skepticism about Invsco's position during the hearing:
Judge Mason: I'll buy a unit. (Invsco) wants to give me the money. How hard is that?
Mr. Baugher: If you want to borrow the money from (Invsco) and pay it back at closing, and if you were not a judge, that might be arranged.
Judge Mason: But, you know, (Invsco) comes in with 20 contracts and says, 'Look, I sold 20 units,' without telling you right away that I gave them the down payment and that I have a financial interest in these contracts, but 'Look, I met my benchmark.' Isn't that what happened?
Mr. Baugher: Not quite, no.
An Invsco spokesman declines to comment, and Mr. Baugher was unavailable for comment. Donald Resnick, a partner with law firm Jenner & Block LLP, which represents the Ricker-Murphy venture, declined to comment.
Since the court hearing, the affiliate of Ricker-Murphy has filed a counterclaim against Invsco.
Invsco "vigorously denies" the allegations in the counterclaim and will press forward on its own claims against the Ricker Murphy affiliate, Jason Rosenthal, also a partner with Schopf & Weiss, said in an interview Tuesday.
Besides fending off the fraud allegation, the thrust of Invsco's case is that the Ricker-Murphy venture interfered with Invsco's sales efforts, and arbitrarily picked dates by which sales targets had to be met.
In the course of attacking Ricker-Murphy, Invsco's lawyer, Mr. Baugher, said the development venture did not complete key disclosure documents that must accompany sales contracts until May, well after sales were under way. The delay in completing the documents raises questions about the validity of pending contracts, he said, a contention that led to this exchange at the hearing:
Judge Mason: So none of the contracts that your client has entered into are valid.
Mr. Baugher: Well, I'm not saying that. I particularly don't want to say that on a court record. ... (But) those contracts have — are in some jeopardy at this point.
A spokesman for Ricker-Murphy denies the sales contracts are in jeopardy, but declines further comment.
