NEW YORK - (Business Wire) Coventry Real Estate Advisors (Coventry) today filed a $500 million lawsuit in the Supreme Court of the State of New York against publicly-traded Developers Diversified Realty (NYSE: DDR) for fraud, malfeasance, mismanagement, violation of fiduciary and contractual obligations and self-dealing in 12 retail real estate projects across the country where DDR provided management, leasing and development services and was a co-investor with Coventry. Coventry is also asking the Court for consequential and punitive damages. Coventry said that as a result of DDR’s breaches of contract and fiduciary duties owed to Coventry, it has terminated DDR as the leasing and management agent across the portfolio of assets.
“After attempting for years to compel DDR to live up to its obligations, it is with great reluctance that we take this step. 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,” said Peter Henkel, Coventry’s President and Chief Executive Officer.
According to the complaint, as an equity owner and partner in Coventry Real Estate Fund II, DDR agreed to manage, develop and lease the properties that the fund acquired between 2003 and 2006. DDR elected not to fulfill its fiduciary duties, and instead, undermined Coventry and pursued business practices that generated significant fee income for DDR at the expense of the investors in the fund.
Coventry alleges that it negotiated for ‘first class’ management, leasing and development services; timely, complete and competent professional reports; good faith and professional recommendations for acquisitions; and a professional fiduciary relationship. Instead, DDR failed to commit adequate and professional resources; left Coventry uninformed on material aspects of the status of the properties; misrepresented opportunities on assets it sold to Coventry; and purposely inflated fees and escalated costs to give credence to even greater fees. The effect of DDR’s purposeful actions have made many of the properties commercially untenable.
Coventry stated that as a result of DDR’s breaches of its contractual, fiduciary and common law duties, DDR significantly impaired the values of Coventry’s investments, while enhancing the value of DDR’s stock price, placing itself in a position to acquire at distressed prices some of the same properties DDR recommended that Coventry acquire and which it promised to manage, lease and develop for Coventry. As a result, Coventry is terminating DDR as manager for all of the properties and is bringing this action to vindicate its rights and the rights of its limited partners.
About Coventry Real Estate Advisors
Coventry Real Estate Advisors, founded in 1998, is a leading real estate investment manager offering a broad array of services to institutional investors seeking superior risk-adjusted returns in the value-added retail/mixed-use property sector. Coventry has developed a successful track record of identifying and capitalizing on unique opportunities in the retail/mixed use sector. The firm has invested over $2.5 billion in transactions since inception through Funds I, II and III.
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Elliot Sloane, 212-446-1860
esloane@sloanepr.com
