ZOM Ordered To Pay $323M For Circumventing Partner In Arizona Multifamily JV
National multifamily developer ZOM Living made its Arizona debut by stealing projects from another developer, a jury has found.
A Maricopa County jury ruled on the side of Gray Development Group, which sued ZOM for breach of contract and implied good faith and fair dealing. As a result, ZOM has agreed to pay $323M in damages to the defunct developer.
In 2019, Arizona-based Gray Development invited ZOM to form a joint venture that would see the latter develop its first five multifamily projects in Arizona. They were part of Gray's planned $1.4B development pipeline that consisted of 13 projects, expected to deliver over the course of more than a decade.
The duo entered into a confidentiality and noncircumvention agreement at the time.
Gray said it shared confidential details on financial aspects, market analysis, planning, business relationships and strategies that it obtained over a 30-year history in Arizona. Gray closed up shop in 2020.
For the next 10 months, Gray said, ZOM pushed Gray for more of its proprietary information and background on the Arizona market before shutting the developer out of the projects completely and continuing the developments solo, breaching their contract.
ZOM declined to comment.
ZOM’s only Arizona projects in the works were created and planned by Gray before ZOM was in the picture, Gray CEO Bruce Gray successfully argued in court.
The projects consist of four apartment communities in Phoenix and Scottsdale. All broke ground last year and are expected to deliver in 2027. The land, totaling 33 acres, was picked up by a ZOM affiliate through the U.S. Bankruptcy Court in 2021.
One of the Phoenix projects is a 416-unit, upscale multifamily project in Compass' master-planned community, Desert Ridge, which is near Taiwan Semiconductor Manufacturing Co.’s upcoming 1,000-acre manufacturing center. Dubbed Mezzo Desert Ridge, the development landed $88M in construction financing from Origin.
The other Phoenix project, Maizon, is in the city’s Biltmore neighborhood and comprises 341 units. Old Town Scottsdale’s Hazel is a 362-unit mid-rise building. Azure will be an upscale offering with 170 units in Scottsdale's Waterfront District.
ZOM is a national multifamily and senior housing developer based in Orlando. It has built over 24,000 units on its own and through joint ventures.
