Plaza Buyers of $53.5 Million Penthouses Sue Elad for Fraud

Plaza Buyers of $53.5 Million Penthouses Sue Elad for Fraud 2008-09-08 19:17:05.410 GMT By David M. Levitt Sept. 8 (Bloomberg) -- The buyers of two penthouse condominium apartments for $53.5 million in the Plaza Hotel sued the developer for fraud, claiming they were misled about the quality of the properties. Elad Properties LLC promised ``one of a kind'' apartments on Fifth Avenue but made... [more]

Plaza Buyers of $53.5 Million Penthouses Sue Elad for Fraud 2008-09-08 19:17:05.410 GMT By David M. Levitt Sept. 8 (Bloomberg) -- The buyers of two penthouse condominium apartments for $53.5 million in the Plaza Hotel sued the developer for fraud, claiming they were misled about the quality of the properties. Elad Properties LLC promised ``one of a kind'' apartments on Fifth Avenue but made ``material changes'' to the plans during construction and failed to disclose them, according to a 55-page complaint filed on Sept. 5 in New York State Supreme Court. The buyers weren't named. ``This was a classic bait and switch,'' Y. David Scharf, the purchaser's lawyer, said in a statement issued today. ``My client was led to believe that it would receive one of the most luxurious apartments in New York history; It got far less than what it bargained for.'' Design changes to the original plans decreased the size of the apartments, lowered ceiling heights and shrunk the windows, according to the complaint. Among those who bought condominiums at the Plaza are former Bear Stearns Cos. Chief Executive Officer James Cayne and New York developer Harry Macklowe. The buyers, identified as Penthouse 2009 Inc. and Penthouse 2011 Inc., said they bought the units sight unseen, based on representations from the developer and broker. ``Unlike the classic Eloise series of children's books set in the Plaza Hotel,'' where the rooms ``embodied the height of elegance and sophistication, the same cannot be said of the penthouses,'' the complaint says. $400 Million Renovation Elad spent $400 million and two years renovating the Plaza, famed for its Palm Court, Oak Room bar and guestbook that has included Marilyn Monroe, Truman Capote and F. Scott Fitzgerald, with 182 condominiums and 282 hotel rooms. The plaintiffs agreed to pay $53.5 million for the penthouses. When the buyers refused to close the sale, Elad declared them in default and sought to keep almost all of their $11 million deposit, according to the lawsuit. The plaintiffs are seeking a return of the deposit and more than $20 million in damages. Elad's broker, Stribling & Associates, and its law firm, Kramer Levin Nafthalis & Frankel LLP, are named as co- defendants. Kramer Levin is holding the deposit for the apartments. The lawsuit is ``baseless,'' Jay Neveloff, a partner at Kramer Levin, said in a statement. ``The apartments as delivered are the apartments as described on the plans he reviewed and the contract he signed,'' Neveloff said. ``Because the purchaser has, for some reason, changed his mind and decided not to close, does not alter the facts.'' The suit is Penthouse 2009 Inc. v. Plaza Residential Owner LP, 602578-08, Supreme Court of the State of New York, County of New York. [less]