Businesspeople sue KB Home subsidiary

A group of local businesspeople is suing a subsidiary of KB Home for $60 million, claiming the homebuilder reneged on promises to install streets, sewer and utility connections needed for a commercial development in Henderson.

Integrated Financial Associates, a mortgage brokerage firm in Las Vegas, is suing KB Home Nevada Inc. The mortgage firm alleges it made a loan to a developer based on promises from KB Home Nevada that infrastructure would be built for an 83-acre development in the Inspirada Town Center, an area designated for commercial development in southern Henderson.

Attorney Phillip Aurbach filed the lawsuit in Clark County District Court on Nov. 4, seeking $50 million to $60 million or more in compensatory damages plus punitive damages.

The lawsuit accuses the defendants of negligent misrepresentation, intentional interference with a contract, breach of contract, unjust enrichment and other civil violations.

Integrated Financial's lawsuit says KB Home's conduct was "oppressive, fraudulent and made or committed with malice, for which punitive damages should be assessed." Executives at KB Home Nevada didn't return calls for comment Wednesday.

The lawsuit explains that KB Home Nevada was the largest of eight investors in South Edge, a limited liability company with a 48.5 percent stake in the company. South Edge owned 1,940 acres in Henderson.

The parcels were divided into seven villages, plus the Town Center area. In July 2007, Essex Real Estate Development purchased 83 acres in Town Center from KB Home Nevada for $62 million, according to the lawsuit.

The following October, KB Home Nevada arranged a majority vote to start building infrastructure and told Integrated Financial and Essex that the infrastructure would be built.

In November 2007, Essex and KB Home Nevada entered into a development agreement and created a joint venture, court papers say.

Under the agreement, KB Home Nevada was obligated to get South Edge to build infrastructure for the 83 acres, including streets, curbs and utility connections, according to the lawsuit. Alternatively, KB Home Nevada was obligated to build the infrastructure itself.

Integrated Financial loaned $23.1 million to Essex to buy and develop the property, the lawsuit explains. Essex was required to pay KB Home Nevada $12,500 monthly from the loan.

In March, KB Home orchestrated a vote of the South Edge members to stop construction of infrastructure without notice to Integrated Financial or Essex, according to court papers. Since then, KB has failed to build the infrastructure, according to the lawsuit.

In an e-mail, Integrated Financial chief executive William Dyer said: "We regret the need for this litigation, but it was mandated by the actions of the defendant (KB Home NV). In my experience, it is highly uncommon (for a land developer to break an agreement to build promised infrastructure)."

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.