The Superior Court of New Jersey has granted a motion for summary judgment to Lowenstein Sandler client First Real Estate Investment Trust of Maryland (“FREIT”), a publicly-traded real estate investment trust based in New Jersey, in a lawsuit arising from a $186 million real estate transaction with Sinatra Properties LLC, a Kushner Companies subsidiary.
FREIT contracted with Sinatra Properties to sell six multi-family apartment complexes. When Sinatra failed to close on the transaction, FREIT gave Sinatra notice of a “purchaser default” and ultimately terminated the purchase agreement.
Sinatra filed a complaint against FREIT in the Superior Court of New Jersey, alleging, among other things, breach of contract and breach of the covenant of good faith and fair dealing. The primary form of relief Sinatra sought was specific performance compelling FREIT to convey the properties to it. In the alternative, Sinatra sought monetary damages, including an order that Sinatra’s $15 million deposit be returned.
FREIT asserted counterclaims for breach of contract, seeking an order compelling Sinatra to turn over the $15 million deposit to FREIT. FREIT also asserted a third party claim against a Kushner Companies affiliate alleging a breach of confidentiality obligations.
Following the conclusion of extensive discovery, both FREIT and Sinatra filed competing motions for summary judgment. By Order dated February 4, 2022, the Court granted summary judgment in favor of FREIT, finding that Sinatra had breached the agreement, had no right to specific performance, and could not compel a sale of the properties. Accordingly, the Court dismissed all of Sinatra’s claims for relief with prejudice. The Court also found that the provision of the agreement entitling FREIT to retain the $15 million deposit as liquidated damages was an unenforceable penalty, and ordered that the deposit be returned to Sinatra.
The successful Lowenstein team includes Michael B. Himmel, Matthew M. Oliver, Kent Anderson, and Carly Coleman.
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