Airbnb has halted plans for a branded apartments concept after accusing Miami real estate developer Harvey Hernandez of defrauding the company of over $11 million.
The company claims that it invested over $11 million with Hernandez’s Newgard Development Group to offer Airbnb-branded apartments. The plan was for Hernandez to build seven of these projects, with a Kissimmee, Florida location supposed to open in 2019.
Airbnb had ambitious plans for branded buildings. Miami’s Natiivo was set to be the first-ever property that’s designed, built, and licensed exclusively for home-sharing, It was planned to feature 42 stories, 412 condos and 192 hotel rooms, all of which could be rented out via the platform, as reported by New York Post.
Similar projects were planned for Austin, Nashville, and Orlando, among other locations. Most of these sites were set to open in the coming years, with the Miami location advertising that it would be available for rent in 2022.
The company noted in a lawsuit filed last week, however, that none of the agreed upon locations were making significant progress and has accused Hernandez and Newgard Development Group (NDG Homesharing) of fraud, as reported by TheRealDeal.
“NGD and Hernandez stole funds, made unauthorized loans to other Hernandez-controlled companies, fraudulently backdated documents, breached contracts, and then lied repeatedly in an attempt to cover their tracks,” the company wrote in a statement.
Airbnb alleges that over $1 million of the funds provided by the company to Hernandez were siphoned to a personal project and that he tried to cover up the alleged theft with fraudulent and backdated documentation.
According to the lawsuit, Airbnb wants Hernandez to return the $11 million and they want out of their joint contract. His attorneys, however, has called the suit “legally defective and factually inaccurate.”
“This is a case of a big corporate player attempting to use its size (and litigation tactics) to improperly usurp an innovative business and technology from the hardworking founder and the Miami-based NGD company,” said Michael G. Austin of McDermott Will & Emery, who represent Hernandez NGD Homesharing.
This lawsuit comes as Airbnb prepares for its IPO, which is set to occur later this year. The company has not announced if they will continue to pursue branded apartment concepts with a new developer. Analysts have suggested that the company has been pursuing branded apartments as an attempt to convince developers and property managers to allow Airbnb rentals.
photo credit: airbnb