The bench trial between the trustee of a Dallas luxury senior living community and its landlord began Tuesday afternoon in U.S. District Court Judge Ada Brown’s courtroom.
The Edgemere, located in University Park, signed a ground lease agreement with Intercity Investment Properties in 1999 for 55 years. However, the company began to struggle financially, defaulted on payments and went into bankruptcy in 2022.
The Dallas Morning News reported the senior living community was bought by Bay 9 Holdings in June 2023 for about $48.5 million. The community is now managed by Certus Living.
Former Western District Bankruptcy Court Judge Leif Clark is the trustee of the Edgemere Litigation Trust and brought breach of contract and fraud claims against Intercity. The claims are breach of NDA, promissory fraud, tortious interference, breach of forbearance agreement, civil conspiracy and equitable subordination.
Edgemere’s lawyer, Greg Taylor of Diamond McCarthy, told Judge Brown in his opening statement Tuesday that Intercity intentionally attempted to “blow up Edgemere” and directly damaged its cash flow by trying to take over the community and turn it into a senior living rental community.
Taylor said that Intercity attempted to renegotiate the ground lease in November 2021 and later hired a public relations firm to create false reports on Edgemere’s business.
Jamil Alibhai of Munsch Hardt Kopf and Harr, who represents Intercity, argued that Edgemere “threatened to and breached” the ground lease, so Intercity needed to figure out what to do with the property. The landlord hired Kong Capital, a consulting and investment firm.
Edgemere claims Intercity breached its NDA when working with Kong Capital. Alibhai said that Intercity did not breach its NDA by working with Kong Capital. He also told the court that his client did not breach the forbearance agreement because that information was publicly available.
He said Intercity hired Monument Group after receiving a threat from Edgemere that it would create a public relations problem.
Alibhai told Judge Brown that there are no damages to award and that he “would tell a jury ‘you’re not going to get to that question.’”
Edgemere’s first witness was senior managing director at FTI Consulting, Chad Shandler, who was once a financial advisor to Edgemere and is also a damages expert.
He testified Edgemere’s model of having an entrance fee was normal business practice. Intercity argues that the entrance-fee model wasn’t sustainable on leased property. Following its restructuring, Edgemere no longer requires an entrance fee for its residents.
Shandler’s opinion on the estimated damages is $118 million due to the alleged breaches.
The bench trial is expected to last five or six days.
Allan Diamond, Brian Hogue, Christopher Johnson, Drew Jones and Stephen Loden of Diamond McCarthy represent Clark, trustee of the Edgemere litigation trust.
Garrick Smith, Brent Turman, Caroline Rumbolo, Chad Ray, Michael Harvey and Toni Swanger of Munsch Hardt Kopf and Harr represented Intercity Investment Properties.
The case number is 3:24-cv-3075.