Santa Fe real estate tycoon sued over $20M investment - Albuquerque Journal

Santa Fe real estate tycoon sued over $20M investment

Copyright © 2016 Albuquerque Journal

Correction: This story has been amended to reflect Dan Burrell’s company filed a countersuit in federal court, not Texas state court as previously reported.

LAS CRUCES – Two real estate tycoons – a young New Mexico up-and-comer and an older West Texas powerhouse – are duking it out in the courts over a bungled investment deal that has pitted the former business partners against each other.

Dan Burrell
BURRELL: Suit charges his company defaulted

A company led by El Paso’s Bill Sanders, a 74-year-old known as a visionary for his multibillion-dollar real estate deals, has sued a company set up by Santa Fe-based Dan Burrell, claiming he breached a contract and defaulted on a planned investment.

Burrell, the 37-year-old real estate investor behind New Mexico State University’s new osteopathic medical school, counter-sued in federal court alleging Sanders’ company defrauded Burrell and other investors.

Bill Sanders
SANDERS: Leading innovator in real estate

The lawsuits are a rare public airing of private discord for both men.

Sanders declined to comment for this article through a spokesperson. Burrell, who, according to the complaint, recruited investors and made an undisclosed personal investment, declined to comment.

The transaction, in the works for six months and inked in March, was framed as a real estate play in which Burrell’s Borderplex Investment Partners LLC would put $20 million into Sanders’ Borderplex Realty Trust to fund multi-family housing developments in the Southwest, according to court documents.

The $20 million securities purchase was structured to take place in three payments. Burrell and his investors paid the initial $8.5 million but did not pay the $1.5 million and $10 million installments due in March and April, according to court documents.

This is where the two sides’ stories diverge.

Burrell’s investors allege that the agreement was “based on multiple fraudulent misrepresentations” and say they want their $8.5 million back. Sanders’ company wants the rest of the money it says it is owed.

The players

Sanders is widely regarded as the godfather of the real estate investment trust, or REIT, an investment vehicle that buys stakes in property or mortgages and, when taken public, trades like a stock. He built up a real estate holding company in the 1990s that he sold in 2001 to GE Capital for about $5.4 billion.

Cornell Real Estate Review once called him the “Warren Buffett of real estate,” comparing him to the legendary investor.

He is the man – both lauded and derided by locals – behind the downtown redevelopment plan that saw El Paso’s City Hall knocked down in 2013 to build a minor league baseball stadium.

Sanders has New Mexico connections. He owns sprawling ranches outside Santa Fe and Columbus. His major business today, Strategic Growth Bancorp Inc., owns a string of banks in the Southwest including First National Santa Fe.

Burrell is a New York native who brought his Rosemont Realty to New Mexico in 2010 and last year sold a controlling stake in the commercial real estate venture to Hong Kong-based Gemini Investments for $115 million.

Last year, he founded the $85 million Burrell College of Osteopathic Medicine, which opens to its first class in August. NMSU Chancellor and former Gov. Garrey Carruthers has called Burrell “one of the most exciting new entrepreneurs in New Mexico.”

Although the complaint by Sanders’ Borderplex Realty Trust never names Sanders directly, Burrell’s lawsuit characterizes Sanders as the architect of the now-defunct deal.

Charlie Crowder, a retired longtime real estate mogul in southern New Mexico, said it is “extremely rare” for Sanders to take a business disagreement to court and speculated that he might have done so “to pacify some people who lost money.”

Burrell’s lawsuit claims Sanders’ Borderplex Realty Trust includes “more than 200 high net worth individuals.” Neither Sanders’ nor Burrell’s complaints disclose the names of their investors.

The disagreement

The discord stems from how the multi-family housing real estate developer named in the deal, Dallas-based Encore Enterprises, would be compensated under the transaction. Burrell’s investors allege that Encore would have been “paid in advance for success that it might never achieve” – and that up-front payments totaling $13.8 million were deliberately disguised in the agreement.

It appears that the alleged “misrepresentations” were not uncovered by Burrell’s investors until after the agreement was signed.

“BRT succeeded in duping plaintiff into executing the subscription agreement… which, of course, plaintiff would not have done had it known the truth,” according to Burrell’s lawsuit.

Sanders’ company is allegedly “holding $8.5 million of plaintiff’s money hostage.”

The complaint by Borderplex Realty Trust claims that Burrell’s request to rescind the payment constitutes a “breach” of the companies’ agreement and a “default” on the investors’ obligations.

Burrell’s complaint says his investors offered an olive branch of sorts to the Sanders camp, saying Borderplex Realty Trust could use the $8.5 million interest-free as long as the company agreed to repay the cash once it gathered new investors.

Instead, Borderplex Realty Trust pulled the plug on the deal with Encore, according to court documents.

Borderplex Realty Trust filed its lawsuit in the 168th District Court in El Paso County, Texas. Burrell’s Borderplex Investment Partners filed in U.S. District Court for the Western District of Texas.

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