NEW YORK, NY - An announced $2 billion deal between developers Northland Investment Corp. and Tarragon Corp. has soured, breaking up a partnership between two companies that had envisioned major investment in southeastern Connecticut. Northland says the breakup of the deal puts thousands of apartment-dwellers and employees, including some from New London and Groton, at risk, while Tarragon officials counter that Northland is acting the bully and purposefully scaring people with misinformation.
The two companies, separately, have proposed a number of major developments in the region in the past. Northland is currently negotiating with officials in Preston to build a luxury resort on the former Norwich Hospital site. Tarragon, which at one time juggled a number of major plans in the region, including one along the Thames River in Montville that never materialized, owns apartment buildings in southeastern Connecticut. The companies' holdings locally include 1,000 apartment units in New London and Groton: the Gull Harbor, Nutmeg Woods and Ocean Beach apartments in New London and Groton Towers in Groton.
It was unclear Thursday how the partnership failure might affect those properties; Northland is currently the property management company for hundreds of Tarragon properties but is turning that role back over to Tarragon. Tarragon Chief Executive Officer William Friedman said Thursday the complexes are operating successfully on their own.
The companies announced on March 31 that they had formed a $2 billion multifamily joint venture in which privately held Northland would provide capital and stability to Tarragon, a publicly traded company that last year experienced a cash crunch and saw its stock price plummet. The deal on the joint venture never closed, however, and the companies have since filed lawsuits against each other. Northland lodged two lawsuits against Tarragon, one regarding the failure of a Florida property to close and another on the failure of the joint venture to close; Northland asks for damages of at least $1 billion in the second lawsuit. Tarragon filed a countersuit against Northland dated Wednesday.
Although they announced a $2 billion venture in March, the companies' lawsuits refer to a deal of $1 billion or less. The joint venture was not a merger or a buyout, and the companies remain independent in other areas. Northland accuses Tarragon of concocting a way to fail in the joint venture so its principals can negotiate with another company to make more money. The resultant failure, Northland alleges, affects thousands of people. "Not only are hundreds of employees uncertain about their future employment," the lawsuit says, "but thousands of residents face the risk of disrupted property management services if Tarragon's unconscionable conduct continues."
Tarragon has publicly reported, through its second-quarter report filed Aug. 11, that Northland was to blame for the failure to close a deal to buy a Florida rental apartment community from Tarragon. Tarragon reported to its stockholders that Northland "failed to close this purchase, despite receiving several extensions and the consent of the lender to the assumption and extension of the existing financing." Tarragon reported that when it requested the $250,000 contract deposit from the escrow agent, Northland immediately filed suit "over entitlement to the deposit." Friedman said Thursday that Tarragon had given Northland six extensions, a scenario Northland denies in its lawsuit.
Because Northland assumed property management duties at 27 Tarragon properties, those employees are on Northland's payroll. On Wednesday, Northland CEO Steven Rosenthal e-mailed a memo addressed to those employees. Rosenthal said Tarragon had terminated the joint venture and insinuated, in various segments of the letter, that the move could prove fatal to the already-troubled Tarragon. "Terminating that agreement in this uncertain economic environment could have costly consequences for Tarragon," Rosenthal wrote, "whereas a larger and stronger entity could weather the present storms in the market more effectively."
Later in the letter, Rosenthal claims that Tarragon is on the verge of bankruptcy, though he does not specify where he received the information. "Based on information which we believe to be accurate, Tarragon's future may be uncertain and could include a possible bankruptcy filing within the next several weeks," he wrote. Friedman expressed disgust at Rosenthal's letter on Thursday. "I think it's despicable for him to make threats to his employees, (who are) my former and future employees," Friedman said by phone Thursday. "I mean, what kind of person is he?"
In a statement issued through the company's spokesmen Thursday, Rosenthal reiterated Northland's disappointment in the failure of the joint venture to close and also repeated that Northland feels Tarragon is putting the residents in its properties at risk, physically and financially.
Source: TheDay.com