Real Estate News

Is this nasty feud between brokerage partners a sign of trouble in the condo market?

The view from Brickell City Centre last November. The new center gave a big boost to total property values in the city of Miami.
The view from Brickell City Centre last November. The new center gave a big boost to total property values in the city of Miami.

One of Miami’s highest-profile real estate brokerages is engaged in an ugly split, with accusations of substance abuse, mismanagement and runaway expenditures.

For 25 years, International Sales Group — ISG — has been known as the sales wizards behind condo projects at Brickell City Centre, Echo Brickell and Muse Residences in Sunny Isles. But earlier this week, the Real Deal reported on a legal fight between principals Philip Spiegelman and Craig Studnicky that began last spring.

The legal tussle has become Topic No. 1 in Miami real estate circles. At least one observer believes the breakup is a symptom of the cooling luxury market and may be a harbinger of tougher times to come.

In May, a corporate entity run by Spiegelman filed a lawsuit to dissolve ISG, claiming that his longtime partner, a Studnicky-run entity called Craig Nicole Inc, “burned through large amounts of cash collected by ISG on sales without producing any profit.” He accused CNI of running up excessive expenses: “ISG’s current overhead expenses approximate $2.4 million per year. It should be one-fifth of that.”

In June, Studnicky’s firm counter-sued, claiming “Spiegelman’s waste and dissipation of company assets has caused the company to lose customers, employees, independent agent sales people and corporate opportunities. Spiegelman’s substance abuse problems and his unpredictable anti-social behavior and inebriation caused him to be unable to function in any productive capacity.”

Studnicky and Spiegelman did not respond to request for comment. But at a Realtor event hosted Wednesday by the Miami Herald, the room was buzzing with the news.

“It’s unfortunate that they’re going through this very difficult patch,” Alicia Cervera Lamadrid, managing partner of Cervera Real Estate, a panelist at the event, said later. “I don’t think they’re leaving the market.”

In a separate suit filed in July, Studnicky sued to recoup $1.8 million he said he loaned to ISG.

Spiegelman’s effort to dissolve ISG is the last resort for businesses in a deadlock, said Andrew Hall, managing partner at Hall Lamb Hall Leto, a commercial litigation firm in Miami.

If a court dissolution moves forward, a court-appointed receiver will “wind-down” the company. Once existing contracts are fulfilled and bills are paid, the remaining assets are liquidated and distributed to stockholders or partners.

But Hall has doubts the feud will go that far. Studnicky could be bluffing to bring Spiegelman to the table for a deal.

“Ultimately these guys are businessmen. Once they’re done hating each other, they’re going to figure something out,” said Hall. “It’s one of those situations where one party says to the other ‘I have your back against the wall, now let’s find a solution.’ “

Some experts say ISG’s breakup reflects the stress of a real estate cycle entering a downturn. While middle-class neighborhood property values are going up, luxury market values in high-end areas such as Key Biscayne and Sunny Isles Beach are down.

“This is a result of the boom days being over and the distress days coming,” said Peter Zalewski, principal with the Miami real estate consultancy Condo Vultures. “Warren Buffett always said: ‘A low tide exposes who’s naked.’ “

Zalewski predicts clients will flee from ISG; developers typically don’t want to be associated with controversy. Other South Florida brokers will then scramble to undercut each other.

This type of brokerage breakup sometimes happens during stress periods, he noted. “But the vitriol between the two speaks to how bad our situation may be.”