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Article Courtesy of The Miami Herald
By Dylan Jackson
Published September 16, 2018
One of Miami’s highest-profile real estate brokerages is engaged in an ugly
split, with accusations of substance abuse, mismanagement and runaway
expenditures.
For 25 years, International Sales Group — ISG — has been
known as the sales wizards behind condo projects at Brickell City Centre,
Echo Brickell and Muse Residences in Sunny Isles. But earlier this week, the
Real Deal reported on a legal fight between principals Philip Spiegelman and
Craig Studnicky that began last spring.
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The legal tussle has become Topic No. 1 in Miami real
estate circles. At least one observer believes the breakup is a symptom of
the cooling luxury market and may be a harbinger of tougher times to come.
In May, a corporate entity run by Spiegelman filed a lawsuit to dissolve ISG,
claiming that his longtime partner, a Studnicky-run entity called Craig
Nicole Inc, “burned through large amounts of cash collected by ISG on sales
without producing any profit.” He accused CNI of running up excessive
expenses: “ISG’s current overhead expenses approximate $2.4 million per
year. It should be one-fifth of that.”
In June, Studnicky’s firm counter-sued, claiming
“Spiegelman’s waste and dissipation of company assets has caused the company
to lose customers, employees, independent agent sales people and corporate
opportunities. Spiegelman’s substance abuse problems and his unpredictable
anti-social behavior and inebriation caused him to be unable to function in
any productive capacity.” |
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The view
from Brickell City Centre last November. The new center gave a big
boost to total property values in the city of Miami.
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Studnicky and Spiegelman did not respond to request for comment. But at a
Realtor event hosted Wednesday by the Miami Herald, the room was buzzing
with the news.
“It’s unfortunate that they’re going through this very difficult patch,”
Alicia Cervera Lamadrid, managing partner of Cervera Real Estate, a panelist
at the event, said later. “I don’t think they’re leaving the market.”
In a separate suit filed in July, Studnicky sued to recoup $1.8 million he
said he loaned to ISG.
Spiegelman’s effort to dissolve ISG is the last resort for businesses in a
deadlock, said Andrew Hall, managing partner at Hall Lamb Hall Leto, a
commercial litigation firm in Miami.
If a court dissolution moves forward, a court-appointed receiver will
“wind-down” the company. Once existing contracts are fulfilled and bills are
paid, the remaining assets are liquidated and distributed to stockholders or
partners.
But Hall has doubts the feud will go that far. Studnicky could be bluffing
to bring Spiegelman to the table for a deal.
“Ultimately these guys are businessmen. Once they’re done hating each other,
they’re going to figure something out,” said Hall. “It’s one of those
situations where one party says to the other ‘I have your back against the
wall, now let’s find a solution.’ “
Some experts say ISG’s breakup reflects the stress of a real estate cycle
entering a downturn. While middle-class neighborhood property values are
going up, luxury market values in high-end areas such as Key Biscayne and
Sunny Isles Beach are down.
“This is a result of the boom days being over and the distress days coming,”
said Peter Zalewski, principal with the Miami real estate consultancy Condo
Vultures. “Warren Buffett always said: ‘A low tide exposes who’s naked.’ “
Zalewski predicts clients will flee from ISG; developers typically don’t
want to be associated with controversy. Other South Florida brokers will
then scramble to undercut each other.
This type of brokerage breakup sometimes happens during stress periods, he
noted. “But the vitriol between the two speaks to how bad our situation may
be.”
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