SoftBank-Backed Startup Sued For $42.4M For Allegedly Backing Out Of Bay Area Lease
An opportunity zone developer is suing Fair, a SoftBank-backed company for $42.4M, alleging the startup intentionally misrepresented its financial situation.
8400 Edgewater says in court filings that Fair made the assertions before backing out of a multimillion-dollar lease agreement for an Oakland property. Fair, which laid off 40% of its staff in October, did not respond to a request for comment.
The lawsuit, filed in Alameda County Superior Court by 8400 Edgewater LLC, alleges the Santa Monica-based car-subscription company did little to uphold the terms of a 10-year lease it signed for 8400 Edgewater Drive in Oakland in July.
Pursuant to that lease, Fair put in place a $2.7M irrevocable standby letter of credit, but after that the company failed to pay its $500K security deposit, rent and other charges required by the agreement, the lawsuit alleges.
The owner of 8400 Edgewater also alleges Fair intentionally misrepresented its own financial situation, reporting that it had recently received $385M in funding from SoftBank to facilitate the car startup's expansion and that 8400 Edgewater Drive would be a flagship operation "for years to come," the lawsuit states.
Fair allegedly said that the lessee of the Oakland property was "essentially a shell company" and that Fair itself "would not be responsible" for the lease obligations, according to the complaint.
The company that owns 8400 Edgewater is registered to Jeffery Neustadt, co-founder and principal of Rubicon Property Group, a Bay Area-based developer. The lawsuit said the company was created "to develop, fund, and manage long-term certain qualified Opportunity Zone projects in economically distressed communities."
Its discussions with Fair began last April before culminating in a signed lease in July, it said in the complaint. The agreement stipulates an initial 10-year term, with two five-year extension options and a tenant improvement allowance of up to $2M, a copy attached to the court complaint shows.
Monthly base rent for the property, which property site Reonomy shows is 148K SF, started at $225K and is scheduled to rise gradually to about $269K, the document said.
"As our complaint lays out in detail, this is a prime example of Fair’s financial mismanagement and bad business practices," Steven Holland, an attorney at Ring Hunter Holland & Schenone, who is representing the owner of 8400 Edgewater, said in a statement.
"Fair intentionally and negligently misrepresented its financials and then reneged on a contractual agreement, costing our client tens of millions of dollars,” he said.