Commonfund unit sued over Westwood Station

Commonfund unit sued over Westwood Station

The Town of Westwood is suing Commonfund Realty Investors and the former development entities overseeing the massive Westwood Station project, accusing the group of ignoring its financial obligations in the repair and restoration of public roadways damaged during preliminary construction.

But there are questions as to whether Commonfund Realty Investors, a real estate fund run by institutional money manager Commonfund of Wilton, Conn., is even liquid enough to meet those demands. Indeed, in its lawsuit filed Nov. 23, The Town of Westwood said Commonfund Realty Investors has “informed the town that it was broke.”

Keith Luke, a Commonfund managing director, said Commonfund Realty Investors believes the suit has no merit and is moving to have it dismissed. He said the investment manager will vigorously defend itself, regardless.

Luke said Commonfund, the parent operation, manages around $27 billion in assets and is not cash constrained. He said Commonfund Realty Investors has around 35 properties in its portfolio and boasted roughly $1 billion in assets at its peak. He said the real estate fund has absorbed heavy losses of late, its properties shedding around 50 percent of their value in the last year alone. He said Commonfund Realty Investors is negotiating with its lenders and hopes to restructure its portfolio to recover as much equity “as possible” for its investors.

“Certainly the equity value of our client investments in that fund have dropped precipitously,” Luke said. “But this is a slow recovery and we don’t know at this point. … There’s no talk of liquidating the fund.” Luke said Commonfund has a “long history of cooperation” with Westwood officials and that the investment outfit is “looking to revive that.”

Founded in 1971, Commonfund manages money for endowments and pension plans while also publishing research and educational materials focused on investment practices.

The Boston Business Journal first reported last month that the long-stalled Westwood Station project was acquired by an entity run by Woburn-based Eastern Development after being aggressively shopped to potential bidders. The project’s original development team was a joint venture that included Commonfund as well as Cabot, Cabot & Forbes of Boston and New England Development of Newton. Eastern has since retained New England Development, which is not a named defendant in the Town of Westwood suit, to continue managing the project’s retail arm.

In addition to Commonfund Realty Investors, the suit names as defendants two additional entities — CFRI University Holdings and CFRI/Doherty Westwood Station Holdings — involved with the project’s initial development.

In their Nov. 23 suit filed in Norfolk District Court, Westwood officials said Commonfund Realty Investors was contractually obligated to release money for the repair of two roads damaged during the project’s initial stages. The town also said Commonfund Realty Investors failed to follow through on an agreement to maintain a minimum balance in an escrow account intended to cover such repairs. All in, Westwood has asked the court to force Commonfund Realty Investors to release roughly $1.5 million to restore the roads and agreed-upon escrow balance.

In its legal complaint, Westwood said the damaged roadways include Rosemont Road and University Avenue, a primary access point for commuters traveling to and from a major train station operated by the Massachusetts Bay Transit Authority. The town also said Commonfund Realty Investors and the project’s former development entity owe some $1.9 million in unpaid property taxes. The suit alleges that Commonfund Realty Investors has refused to release the money sought by the town.

The town said Commonfund Realty Investors is obligated to post additional collateral, in the form of a renewed $5.75 million letter credit, if its cash position falls below $25 million. As part of its suit, the town has requested the court force Commonfund Realty Investors to produce updated reports on its financial position.

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