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Developer of City Center West Orange EB-5 project in Ocoee owes broker $5M-plus commission, lawsuit claims

City Center West Orange will feature luxury apartments and retail and restaurant space with water views of Lake Bennet.
City Center West Orange will feature luxury apartments and retail and restaurant space with water views of Lake Bennet. (City of Ocoee)

A commercial broker who claims to be involved in the City Center West Orange mixed-use development in Ocoee is in the middle of a legal dispute with its developer, alleging more than $5 million in unpaid commissions.

Tom Nelson, the owner of Orlando-based Premier Nelson Group, collectively sued developer David Townsend and affiliated companies City Center West Orange LLC and CCWO Development Management LLC last year in the Ninth Judicial Circuit Court of Florida for breach of oral contract, breach of implied-in-fact contract, breach of an implied-in-law contract, promissory estoppel, and unjust enrichment.

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The defendants deny all claims, according to legal documents.

Nelson did not provide any documentation of the agreement in his court filings. His attorney filed a motion to compel discovery, seeking all related documents regarding the subject arrangement between Nelson and Townsend, in addition to the complete funding history and funding statements of the City Center West Orange mixed-use development, which promises a market value of over $1 billion once complete.

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Mass grading, new roads and other infrastructure work at the City Center West Orange project.
Mass grading, new roads and other infrastructure work at the City Center West Orange project. (Aerial Innovations)

In an email, Townsend said the accusations are a lie. He’s being represented by attorneys Sheena Thakrar and Howard Marks with Burr & Forman.

Nelson, being represented by NeJame Law, told GrowthSpotter the motion to compel was filed after the defendants did not meet the July deadline for full production of discovery. “When one has nothing to hide they produce,” he said.

According to the lawsuit, Nelson met Townsend in the summer of 2017 when Townsend was still in search of funding for the City Center West Orange project. Nelson said Townsend engaged him to bring on investment banking company Morgan Stanley, and in return, agreed to pay a 4% commission for the funds that Nelson helped raise.

Ocoee city records show a bond program, administered by Morgan Stanley, indeed helped establish a Community Development District (CDD) for the proposed City Center West Orange mixed-use project.

In 2018, the Florida Real Estate Regional Center( FRERC) Community Development District was created with the promise of up to $140 million in special assessment bonds that will go toward costs of the planning, financing, acquisition, construction, reconstruction, equipping and installation of the Capital Improvement Program (CIP).

But according to the lawsuit, funding efforts were temporarily stalled.

The roughly 100-acre City Center West Orange mixed-use project in Ocoee will be funded with the support EB-5 financing.
The roughly 100-acre City Center West Orange mixed-use project in Ocoee will be funded with the support EB-5 financing. (City of Ocoee)

The complaint alleges the closing on the bond funding was originally scheduled for July 29, 2019, but pending litigation that affected the City Center West Orange project temporarily halted the financing.

No litigation regarding the project was filed in the Ninth Judicial Circuit Court of Florida until about a year later, when investor Yan Ding and Maxi Stone LLC sued Townsend and other companies associated with the development, upon alleged information and belief that Townsend and affiliated companies were in “deep financial troubles and may be subject to liabilities to governmental agencies and other creditors.”

Ding and Maxi Stone LLC claimed the defendants defaulted on two notes and owed $10 million, for missed payments and interest from June 2019. The case was settled late last year, Orange County records show.

Nelson, the plaintiff for the active lawsuit, claims he helped keep the deal alive and on Jan. 23, 2020 Morgan Stanley closed on $28.9 million of the $140 million for the CDD, according to the lawsuit. Nelson asserts he is owed a commission of $5.6 million (4% of the full $140 million), minus $51,000 already paid by Townsend, plus prejudgment interest, and court costs.

In a response, Townsend’s attorneys noted that Nelson is not registered with the Office of Financial Regulation and “is not entitled to the commission that he seeks.”

Phase I of City Center West Orange is slated to consist of 600 luxury apartments and 200,000 square feet of commercial space.
Phase I of City Center West Orange is slated to consist of 600 luxury apartments and 200,000 square feet of commercial space. (City of Ocoee)

Stephanie Reed Traband, a partner at the Miami-based commercial litigation law firm LKLSG, who is not involved in the lawsuit, said verbal contracts are not typically seen in contract litigation, but they do happen and are legitimate.

“It’s not your run-of-the-mill case, but it’s entirely possible to enforce,” she said. “It just depends on what kind of evidence in regards to the material terms of the deal you have to show.”

The proposed mixed-use development is located north of West Colonial Drive, east of Bluford Avenue, south of East Geneva Street and west of Montgomery Avenue.

A 2018 development program for the CDD shows City Center West Orange can accommodate 514,000 square feet of retail space, 232,000 square feet of office space, 2,300 condominiums, 300 vacation rental units, 77,000 square feet of convention center space and 244 hotel rooms.

Marketing material online states construction of the proposed district infrastructure associated with Phase I began in January of 2017. Today, the project is progressing out of the infrastructure and permitting phases.

Michael Rumer, Ocoee’s development services director, said the first parking garages are under review and permits are ready to be issued.

“The utilities, the construction of Maine Street from the site all the way to Blackwood Avenue... all the infrastructure, including roads and water sewer is done,” he said. The developer also completed the foundations for the first two parking garages, he adds.

Upon the completion of the review process, permits can be issued and the developer can begin designing the wrap-around buildings that will contain the apartment units, retail, and restaurant space that are part of the first phase.

Phase I is slated to consist of 600 luxury apartments and 200,000 square feet of commercial space across a mix of uses including restaurant, retail, entertainment, hotel and office.

In an email exchange with Townsend, the developer said the team is preparing to go vertical in the fall and anticipate opening the first couple of buildings within the next 24 months.

The project is USCIS-approved for EB-5 foreign investments and can raise up to $100 million. Townsend said he’s generated about $50 million so far from foreign investors and expects to raise the balance over the next year.

According to online marketing material, 35% of the project’s capital is being sourced from foreign funds, 26% is capital raised from the developer, 21% is bank loans and 18% is preferred equity.

LKLSG’s Traband said any investors involved in EB-5 projects should do their due diligence and check a developer’s credibility. She adds any litigation surrounding an EB-5 project should raise a red flag.

“Going forward I would like to see more regular disclosure from developers to their investors because a lot of times investors make these investments and they don’t get regular feedback because there’s no government or contractual obligation for it,” she said.

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Traband specializes in EB-5 fraud cases and is involved in the Jay Peak Ski Resort fraud case in Vermont, one of the largest EB-5 fraud cases to date.

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Traband and LKLSG attorney Jeff Schneider represented the court-appointed receiver for the project, Michael Goldberg, who sued the developers’ former law firm, Mitchell Silberberg & Knupp LLP in federal court in Miami, alleging legal malpractice and negligence in its fiduciary duties. The case recently reached a $32.5 million settlement.

Have a tip about Central Florida development? Contact me at arabines@GrowthSpotter.com or (407) 491-3357, or tweet me at @amanda_rabines. Follow GrowthSpotter on Facebook, Twitter and LinkedIn.

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