X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

NEW YORK CITY-Coventry Real Estate Advisors filed a $500-million lawsuit Wednesday against Developers Diversified Realty, alleging that DDR committed fraud, malfeasance, mismanagement, violation of fiduciary and contractual obligations and self-dealing in a dozen retail properties DDR was leasing and managing for Coventry. In a release, locally based Coventry said it had terminated DDR as leasing and managing agent of those assets. A spokesman for DDR denies Coventry’s allegations.

The complaint against Cleveland-based DDR, filed Wednesday in New York State Supreme Court here, says that although Coventry negotiated for “first class” leasing, management and development services on the properties, DDR failed to provide them. Further, the complaint says that DDR “left Coventry in the dark” when it came to financial, development and leasing reports on the properties, which the two companies acquired between 2003 and 2006 in a co-investment agreement.

Also alleged in the complaint is that DDR’s intent was “to allow the properties to flounder and ultimately fail, while focusing on its real goal: collect as much in fees as possible while making only the most cursory effort to perform its responsibilities.” The rationale, according to the complaint, was that DDR as a publicly traded company wanted to boost its short-term earnings “without regard for the long-term health of the properties.” Coventry is seeking at least $500 million in consequential and punitive damages, according to the complaint.

“After attempting for years to compel DDR to live up to its obligations, it is with great reluctance that we take this step,” Peter Henkel, Coventry’s president and CEO, says in a release. “We have, however, a fiduciary obligation to protect the significant investment of hundreds of millions of dollars made by many institutional investors, including pension and retirement funds on behalf of their investors.”

DDR’s spokesman tells GlobeSt.com that the company had been sent the news release announcing the lawsuit, but had not yet been served with the complaint itself as of late Wednesday afternoon. He says DDR “vehemently denies the allegations” presented in the release and will “vigorously defend itself against such allegations in any legal proceeding.” The spokesman adds that DDR has not received notice of termination of any of its agreements with Coventry, “and denies that it has breached any terms of any such agreements.”

DDR and Coventry had previously joint ventured with Boston-based Harbor Cos. to build Bloomfield Park, a the 88-acre master-planned community in Bloomfield Hills, MI. The project from its inception was plagued by border disputes and fiduciary disagreements between the developers.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.