Developer claims ex-partners ‘stole’ Town Square

The developer of the Town Square shopping and office complex south of the Strip has sued the Connecticut investment fund that foreclosed on it last year, seeking more than $300 million in damages.

According to the complaint filed in Clark County District Court late Wednesday, Miami-based developers Jeffrey and Jacquelyn Soffer and their company, Turnberry Capital, spent more than two years trying to restructure nearly $500 million in loans. The effort included bringing in Five Mile Capital Partners of Stamford, Conn., as a potential co-owner.

However, the court papers contend that Five Mile covertly switched from partner to adversary, buying enough of the loans then in default to force a foreclosure and squeeze out the Soffers. Soffers' lawyers contended that this amounted to "stealing" the 1.2-million-square-foot project, noted for its mix of shopping, entertainment and offices set retro architectural style.

"(Five Mile's) conduct was so egregious and vulture-like that it should be punished and made an example of," wrote Soffer attorney Daniel McNutt

Executives at Five Mile did not return calls seeking comment. However, court papers show that Five Mile was concerned that Soffer was misusing Town Square income for purposes such as paying legal bills, while operations deteriorated and tenants departed.

On Monday , Clark County District Court Judge Allan Earl ruled in favor of Town Square lenders in tossing out a lawsuit Soffer filed against them in 2011. In it, he contended the banks had turned their backs on a debt restructure.

But Earl found no deal was made, despite lengthy negotiations.

Soffer is expected to appeal.

Ironically, Soffer is fending off claims by lenders, in another Clark County District Court case, who claim he duped them with overly optimistic reports about the financial condition of the unfinished Fontainebleau on the Strip.

While it opened on November 2007, Town Square became the most prominent local example of a architectural style called new urbanism, which mixed entertainment, shopping and offices in a setting much like a typical downtown from seventy years ago. The traffic pattern was designed to encourage pedestrians to stroll among the stores and mostly consign cars to the periphery.

In addition to a $470 million construction loan funded by a consortium of banks, paid down to $448.6 million in March 2009, a Soffer company obtained another loan of $50 million. This included $20 million from a Five Mile affiliate.

An attempt to obtain $625 million in long-term financing from Lehman Brothers collapsed when the former Wall Street powerhouse failed September 2008. The left Soffer with no choice but to try to rework the terms with incumbent lenders.

In the court papers, Soffer said the lenders were working with him until Five Mile bought enough of the debt to block restructuring. Foreclosure went ahead at a bid of $276.5 million in 2011.

According to the court papers, the Soffers put up a personal guarantee of $40 million if Town Square's value fell short of the amount due on the loan.

Contact reporter Tim O'Reiley at toreiley@reviewjournal.com or 702-387-5290.