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Article Courtesy of The Miami
Herald
By Martha Brannigan
Published
October 19, 2013
A
squabble between stakeholders has led to a foreclosure suit against a
downtown Miami luxury condo project. BrickellHouse developer Harvey
Hernandez and his business partner Jesus Quintero are facing a foreclosure
suit filed by the first mortgage holder of the 46-story project, which is
well under way and reporting strong sales. The dispute turns on a $15.8
million loan that comes due in the summer of 2016.
The
lien holder, JBG Development LLC, is seeking to accelerate the loan to force
early payment of the debt. JBG argues that the developer breached terms of
the contract and is in default, according to a suit filed Oct. 4 in
Miami-Dade Circuit Court.
JBG
Development, which is controlled by Jose Baboun, sold the land at 1300
Brickell Bay Dr. to BrickellHouse Holding LLC in August 2012, receiving $10
million and taking back a mortgage for $15.8 million.
The
current dispute erupted when Hernandez sought to obtain a construction loan
for the 374-unit project and urged Baboun to subordinate JBG’s mortgage to
a construction loan, a move that would send JBG further back in line to get
paid.
In
its suit, JBG said terms of its loan provide for it to subordinate its
position to a construction lender under certain circumstances, but asserts
BrickellHouse hasn’t met those conditions.
It
said BrickellHouse pressured Baboun to accept a subordination that is
disadvantageous to JBG and in violation of the loan agreement.
The
suit alleges BrickellHouse defaulted on non-monetary terms of the loan by
failing to seek JBG’s approval on various matters, including the price
list for units, the wording of sales contracts and the selection of an
escrow agent, and didn’t provide JBG timely copies of purchase contracts.
The
suit also seeks an accounting of the books and records at BrickellHouse
“to determine if net sales proceeds have been properly allocated, whether
BrickellHouse has paid money to parties in contravention of the note.’’
Carlos
A. Marin, a Miami attorney who filed the suit, said “JBG Development LLC
is not seeking a premature payment of the loan, but rather is suing to
protect its interest as provided under the terms of the mortgage
documents.’’
BrickellHouse’s
attorney Robert P. Frankel said the suit is full of frivolous claims.
“To
me it looks like you have a loan that hasn’t matured yet and a seller that
has misgivings or sellers’ regret,’’ Frankel said.
“This
case is about trying to force BrickellHouse to pay them three years before
BrickellHouse is obligated to pay them.’’
According
to Hernandez, chairman and managing director of Newgard Development Group,
the BrickellHouse project is progressing well, with 99 percent of the units
sold and construction moving on time and on budget.
“We
are working on the 37th floor out of 46,’’ Hernandez said. “Everybody
is very happy with it. The quality we’ll be delivering is very, very
nice.’’ The project is slated to be completed next summer, he added.
Alicia
Cervera Lamadrid, managing partner of Cervera Real Estate, which is in
charge of marketing units in the BrickellHouse project, said the lawsuit has
not affected the project to date. “Construction is still going on,’’
Cervera Lamadrid said. “From our perspective, it’s business as
usual.’’
The
Baboun family has been involved with the Brickell Bay Drive site for years.
Kenneth Baboun, Jose’s son, had worked with Hernandez on the BrickellHouse
project during its early phases but left about year ago.
During
the last building boom, the Babouns tried to develop the site themselves.
But in February 2006, Kenneth Baboun, president of BBB Group, announced he
was abandoning the project and returned all the deposits to the buyers.
“This
case is about trying to force BrickellHouse to pay them three years before
BrickellHouse is obligated to pay them,’’ said Frankel. “I’m very
concerned the filing of this lawsuit in bad faith by the plaintiff is going
to have some chilling effect on the project.’’
The
BrickellHouse suit comes as Hernandez obtained a release this year from the
trustee in his Chapter 7 personal bankruptcy case. He filed for protection
from creditors in 2010 in the wake of problems with several real estate
developments. According to bankruptcy court papers, Hernandez still faces
claims from the Internal Revenue Service and his ex-wife.
Luis
Salazar, an attorney for Hernandez, said aside from the outstanding issues
with the IRS and his former wife, Hernandez’s personal bankruptcy case is
resolved. “He put in a pot of cash. He paid all the creditors,’’
Salazar said.
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