Kushner, BLS Holdco Settle Brooklyn Heights Dispute

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Kushner Companies and one of its investors declared an end to a two-year legal war over a Brooklyn Heights multifamily acquisition.

Kushner and BLS Holdco reached a settlement over the 2014 deal, Crain’s reported. Each side is expected to “bear its own costs” as part of the agreement, according to a document filed last month in New York County Supreme Court.

Terms of the settlement were not disclosed and neither side commented on the record to the outlet. The case is expected to be dismissed with prejudice, meaning it can’t be litigated again.

The dispute centered on six former Brooklyn Law School dorms that Kushner acquired for $36.5 million in 2014. It planned to convert three of the properties into luxury single-family homes and three into rentals.

In June 2023, BLS filed a lawsuit against Kushner and chief executive officer Laurent Morali, alleging they mismanaged the Brooklyn Heights portfolio and kept it in the dark on the properties’ financial and legal issues.

BLS claimed it provided the project with more than $10 million in equity, according to its lawsuit. It claimed Kushner’s activity brought its investment to “a wipeout,” further alleging the net asset value of the three multifamily properties was “close to zero.”

The lackluster returns on the apartment buildings was allegedly due in part to changes in state rent laws that limited the landlord’s ability to raise rents on rent-stabilized units. BLS Holdco alleged it was informed by Kushner that only seven of the 77 units in the three buildings were subject to rent stabilization when in actuality, all of the units were subject to rent stabilization, leading to tenant lawsuits targeting Kushner’s improper deregulation of the units.

Months later, Kushner moved to dismiss the complaint, claiming it was a “misguided attempt to shake down” the landlord and saying it didn’t have the fiscal responsibility to BLS that the investor argued it did. The statute of limitations in the case was also brought into question.

— Holden Walter-Warner