Soured Joint Venture Has Northland, New York-Based Partner Suing One Another
By ERIC GERSHON | Courant Staff Writer
September 26, 2008
Northland Investment Corp. and a troubled business partner are wrestling in a New York court over the fate of a once-happy union designed to create a $2 billion apartment portfolio with 21,000 units in a dozen states.
In late August, Northland, Hartford's largest private property owner, filed a civil suit against Tarragon Corp. in New York State Supreme Court. The suit alleges that New York-based Tarragon sabotaged a deal the companies announced in March so that its top executives could try to make a deal with a different partner that would be more lucrative for them personally.
In its complaint, Northland, of Newton, Mass., asks the court to force Tarragon to proceed with the deal, while also awarding Northland $1 billion in damages, as well as damages from Tarragon's top two executives.
On Wednesday, Tarragon called Northland's suit "specious" and the demand for $1 billion "absurd." The company filed a countersuit that accuses Northland of misleading Tarragon in the original deal, breaching various agreements, and slander, among other transgressions.
The countersuit asks the court to release Tarragon from its obligations to Northland and seeks unspecified monetary damages and other remedies.
Meanwhile, the court has ordered Northland to transfer back to Tarragon properties it has been managing on behalf of an interim partnership, a process Northland said it would complete by Oct. 10.
Larry Gottesdiener, Northland's chairman and a New London native, declined to comment Thursday.
William S. Friedman, Tarragon's chairman and CEO, said Thursday that Northland's managers are "control freaks" who "ran off our senior people" and said Tarragon's complaint would describe its position.
Friedman is named as a defendant in Northland's suit, as is Robert Rothenberg, Tarragon's president. Northland's suit accuses the two executives of trying to make a deal with a potential new partner called Arko Holdings Ltd. that was "tied directly to Friedman's and Rothenberg's desire to improve their individual financial positions." Tarragon's countersuit denies those assertions.
Northland, which developed and built the Hartford 21 apartment tower downtown and also owns CityPlace II, 242 Trumbull St. and other Hartford office buildings, has its hands full with big Connecticut projects.
The company is negotiating with officials in Preston to build a $1 billion luxury resort across the Thames River from the Mohegan Sun casino.
Also, New Haven recently picked the company to develop a mixed-use complex on the former site of the Veterans Memorial Coliseum, the largest parcel available for development downtown.
Tarragon, which has offices in Wallingford and develops condominiums, apartments, town houses and other residential real estate projects, has not fared well during the housing downturn and said in March, when the Northland deal was announced, that the partnership would help it raise capital for other projects.
On Aug. 11, Tarragon reported second-quarter financial results that included a net loss of $39.4 million, compared with a net loss of $181 million in the same quarter a year earlier.
Tarragon's share price closed at 34 cents on Thursday, down 23 percent.
In March, Northland said the deal would make it the largest apartment owner and manager in Connecticut. The joint venture was intended to combine the two companies' apartment holdings, creating a single entity that controlled 21,000 apartments, mostly along the Eastern Seaboard, but also in Texas and Arizona.
More than 5,000 of the apartments are in Connecticut, and Northland had been managing them.
The Northland-Tarragon deal was supposed to close in June but did not, a fact that each company attributes to actions by the other.
Reprinted with permission of the Hartford Courant.
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