Realty Execs in lease dispute

Scottsdale-based Realty Executives Inc. has not made a lease payment on its Pinnacle Peak branch office building since October, according to a landlord complaint filed recently in Maricopa County Superior Court.

The company, one of Arizona's largest residential real-estate agencies, recently vacated the property without notice, a violation of its lease agreement, according to the lawsuit, filed by building owner Saypo Cattle Co.

Richard Rector, Realty Executives owner and executive chairman said through a company spokeswoman that Realty Executives, like most other real-estate firms, has experienced financial losses in the past two years and has been working to renegotiate several of its office lease agreements in an effort to cut costs.

Realty Executives has 1,230 licensed agents in Arizona, ranking No. 4 in the state. It also is among Arizona's largest real-estate firms in terms of local sales volume.

Realty Executives has not yet filed an official response to the lawsuit, but spokeswoman Andrea Kalmanovitz said the pending response may include argument that the Saypo complaint contains defamatory statements about Rector personally.

The Saypo complaint, filed March 31, seeks about $143,000 in past-due lease payments, as well as damages for breaching the Pinnacle Peak lease contract, which the lawsuit says was not set to expire until May 2014.

It also accuses the company of fraud, arguing that Realty Executives staff surreptitiously vacated the building just a few weeks after negotiating a lower lease rate.

"We allege that, based on the timing of their midnight move, that they were already planning to move to another space," said Phoenix attorney Daniel Kloberdanz, who is representing Montana-based Saypo in the lawsuit.

Kloberdanz said he had been in discussions with a financial consultant hired by Realty Executives, and that the lease-payment lawsuit could be resolved relatively quickly with a settlement agreement.

But Kloberdanz said the consultant, MCA Financial Group Managing Director Paul Roberts, also has indicated that Realty Executives might file for bankruptcy protection, which could put the lawsuit on hold while the company undergoes financial restructuring.

"They've alluded that they plan to file for Chapter 11," Kloberdanz said.

Kalmanovitz said Realty Executives hired Phoenix-based MCA Financial to help with lease renegotiations and not to advise on a possible Chapter 11 reorganization filing.

"Rich (Rector) did hire MCA Financial but not to pursue restructuring," she said.

Realty Executives Inc., the flagship agency of parent company Realty Executives International Inc., is embroiled in a second lawsuit with its former president, John Foltz.

The company has accused Foltz of a number of violations of his multiple employment contracts, including theft and mismanagement.

In the lawsuit, it accused the former president of infractions, including breach of contract and failing to meet his fiduciary responsibilities while working as an independent contractor for the agency.

The complaint also accused Foltz of "making negative and disparaging remarks" about Rector and his wife and business partner, Robyn Rector, to employees, executives and potential investors "as part of an effort to undermine their authority and credibility."

Foltz has denied the allegations. He filed a counterclaim arguing that the Rectors invented the malfeasance charges to justify breaching a compensation agreement with Foltz that was supposed to remain in effect through 2015. Foltz also is suing for defamation of character.

The counterclaim alleged that Realty Executives owes Foltz for wages dating to April 2010, and for bonus pay dating as far back as 2009.

Foltz argues in his claim that Realty Executives attempted to force him into a new compensation deal that involved a set salary and no profit-sharing or bonuses.

When Foltz refused, the company sued, the counterclaim said.

"Realty Executives has notified Foltz that such amounts due and owing will not be paid, and that its material breaches are intentional," the claim says.

More than 100 pretrial briefs, motions and documents have been filed in the Foltz case.

No trial date has been set.

by J. Craig Anderson The Arizona Republic Apr. 23, 2011 12:00 AM




Realty Execs in lease dispute