Lakewood, New Jersey-based real estate syndicator Silverstone Management is suing the companies responsible for building and developing Bold on Blvd, a 272-unit apartment property in St. Peters, Missouri, for allegedly misrepresenting the condition of the property in a $70 million sale to Silverstone in 2022, according to court documents. 

The suit, filed in the St. Louis County Circuit Court on Nov. 29, lists Silverstone and five associated LLCs — RCG Bold 1, 2, 3, 4 and 5 — as plaintiffs. The defendants include Indianapolis-based developer TWG Management, its affiliate TWG Construction and Bold St. Peters, a Clayton, Missouri-based joint venture between TWG and New York City-based private equity firm Mandrake Capital Partners. 

Neither Silverstone nor Mandrake responded to a request for comment from Multifamily Dive. TWG declined to comment. 

The plaintiff states in court documents that it purchased the property based on information and documentation provided by the defendants. It alleges that these materials presented Bold on Blvd as a development with strong leasing activity and site work and infrastructure in good working order, which would allow for lower operating expenses and a higher return on investment than an older property. Defendants were required to provide all rent rolls, construction drawings and vendor contracts to the plaintiff. 

Before the deal was set to close, the Federal Reserve’s interest rate hikes decreased Bold on Blvd’s market value, according to the lawsuit. In order to keep the property’s value, the plaintiff alleges, Bold St. Peters leased to unqualified tenants in order to increase its income. The joint venture also seller financed $15 million of the $70 million purchase price.

“Unbeknownst to plaintiffs, defendants made material misrepresentations before execution of the contract for sale and during the course of plaintiffs’ due diligence, failed to disclose documentation required by the parties’ contract, and sold plaintiffs a property teeming with latent construction defects and with an artificially inflated occupancy,” the complaint reads. 

According to the lawsuit, these construction defects and deficiencies include:

• Bathtubs installed without supports, leaving a void space between the tub and the subfloor. This resulted in several tubs cracking and collapsing, which in one case severely injured a tenant.
• Moisture penetration in the walls and ceilings, which led to mold growth and wood rot.
• Faulty plumbing connections and cabinetry and other fixtures drilled into pipes.
• Inconsistent installation of gutters. 
• Incorrect installation of the pool heater exhaust fan. 
• Appliance and fire system failures due to wiring issues. 

In addition, the plaintiffs allegedly found that Bold St. Peters had not provided them with all of the property’s lease agreements, and that several tenants had lease agreements that did not align with the ones that Bold St. Peters had given Silverstone. They also allegedly found a number of non-paying tenants who were not qualified to lease at Bold on Blvd based on background checks, including felons. 

“When Silverstone attempted to evict these tenants from the Property, it began receiving threats of violence,” the lawsuit reads. “These threats escalated to the point where Silverstone hired armed security to patrol the property for the protection of its staff and residents.”

In all, the plaintiffs found the property’s legitimate occupancy was less than the 80% represented to them at closing. They allege that it took them 18 months to repair construction defects and re-lease the property. 

Silverstone’s claims in court include a breach of contract, fraudulent nondisclosure and misrepresentation and breach of the implied warranty of habitability. They are requesting a jury trial, and seek damages exceeding $25,000, as well as pre- and post-judgement interest and attorneys’ fees. 

Bold St. Peters had previously filed a lawsuit against Silverstone in Jackson County, Missouri, court on Dec. 7, 2022, shortly before the sale of Bold on Blvd closed on Dec. 30. The case was filed under seal, with details not available to the public, and dismissed by both parties on Jan. 17, 2023.