The three members of a real estate partnership that sells its private placements through independent broker-dealers are in the midst of a bitter legal dispute, potentially endangering tens of millions of dollars in loans and investors' equity as a result, according to a lawsuit by one of the partners.
The battle going on among the owners of Gemini Real Estate Advisors began earlier this year when one of the partners, William Obeid, asked the other two, Christopher La Mack and Dante Massaro, to restructure the company to reflect each other's work and areas of expertise. It reached a boiling point in July when Mr. La Mack and Mr. Massaro sued Mr. Obeid in county court in North Carolina.
According to the company website, Gemini Real Estate Advisors and its partners oversee a real estate portfolio of more than four million square feet with a value of $1 billion. The partnership was founded in 2003.
The North Carolina complaint alleges that Mr. Obeid “abused his position as operating manager of Gemini for personal gain, concealed unauthorized transfers of company funds [and] hired family members at artificially inflated salaries.” The suit also charged he acted outside his authority under the company's operating agreement.
BUSINESS DIVORCE
Mr. Obeid fired back in August, filing a complaint in federal court in New York against Mr. La Mack and Mr. Massaro. The three Gemini partners each own one-third of the company, and Mr. Obeid's lawsuit alleges the two other Gemini partners had proposed a “business divorce” and “embarked on a freeze out process to strengthen their negotiation position in discussions concerning a potential buyout of (Mr.) Obeid.”
This strategy would harm Gemini and its investors, according to Mr. Obeid's lawsuit. Mr. La Mack and Mr. Massaro “executed this strategy despite knowing that it would paralyze Gemini's operations, cause existing development projects to become distressed assets, and risk Gemini's default on more than $97 million in loans and $15 million of investors' equity for its development projects alone.”
Both sides are seeking unspecified damages.
In an affidavit to the New York complaint, Mr. Massaro said: “I believe Mr. Obeid's intent is to create leverage to try and force Mr. La Mack and me to buy him out or increase his ownership interest in Gemini.”
“I am afraid that Mr. Obeid's real goal is (sic) destroy Mr. La Mack and me even if it destroys Gemini,” according to Mr. Massaro's affidavit.
Mr. La Mack and Mr. Massaro's “achievements have been modest,” according to Mr. Obeid's complaint. “Neither has originated any new projects in over five years. Their most meaningful contributions have been to maintain Gemini's retail portfolio and oversee a lackluster leasing effort.”
Mr. Obeid and Mr. La Mack did not respond to calls for comment. Mr. Massaro could not be reached for comment. Mr. Obeid's attorney, Edward Normand, did not respond to calls for comment. The attorney for Mr. La Mack and Mr. Massaro, Noreen Anne Kelly-Dynega, declined to comment.
NEW PRESIDENT
This month, Mr. Massaro, in a letter to investors, said he was the new president and chief executive of Gemini Real Estate Advisors, replacing Mr. Obeid. “Unfortunately, this transition has not been without controversy,” the letter stated. “Since my election as president, there have been legal proceedings amongst the three principals of Gemini regarding their interests in Gemini.”
Gemini was known for selling tenant-in-common exchanges, or TICs, before the real estate collapse put a halt to that market, according to advisers and industry executives. It has since focused on private placements that raise equity for retail real estate and hotels, with Mr. Obeid concentrating on hotels.
Gemini sold its private placements through mid-sized independent broker-dealers. Those included Independent Financial Group, which had $96.6 million in total revenue last year, according to
InvestmentNews data.
The internal Gemini dispute “came out of the blue,” said Joe Miller, CEO of IFG, which sold about $3 million across four Gemini deals since 2009.
FRONT MAN
Mr. Obeid was the face of Gemini for IBDs, Mr. Miller said. “He was the front man so to speak,” he said. “He went to all the conferences.”
The prominent question arising from the partners' dispute is about the loans referred to in Mr. Obeid's lawsuit, Mr. Miller said. “Did the three principals have to sign on the loans,” he asked. “What loans is Obeid talking about and what is his concern?”
Centaurus Financial Inc. and Madison Avenue Securities Inc., with $121.2 million and $21.8 million, respectively, in 2013 total revenue, were among other IBDs that sold Gemini private placements, according to a filing with the Securities and Exchange Commission.
Gemini did not have selling agreements with large IBDs such as
LPL Financial and Commonwealth Financial Network, industry executives said.
