Tzadik co-founder sues CEO Adam Hendry for $8M tied to multifamily deals

A Tzadik Management co-founder is suing the company and CEO Adam Hendry for $8 million tied to sales of a massive multifamily portfolio. 

Alex Arguelles alleges that Hendry and Tzadik affiliates failed to pay him “a single dime from the sale” of the properties, in violation of a settlement agreement, according to Arguelles’ lawsuit filed in March. The portfolio spans nearly 7,000 units, including more than 3,600 apartments in Florida, over 1,000 units in South Dakota and more in Georgia, according to The Real Deal’s analysis of records and news reports. The properties were valued at over $400 million, the suit says. 

The lawsuit is the latest chapter in the four-year saga between the former business partners. Arguelles, Hendry and David Runyon co-founded Hollywood-based Tzadik in 2007, expanding it into a prolific multifamily investment firm with thousands of units nationwide. Arguelles served as chief investment officer. Runyon, former chief visionary officer, is not named in the litigation between Arguelles and Hendry, and no longer works at Tzadik.

The Arguelles-Hendry relationship went awry in 2020 after Arguelles sought to divest from Tzadik. Under a settlement agreement signed that year, Arguelles transferred his ownership stake in the multifamily portfolio to Hendry, according to the lawsuit. In exchange, Arguelles was to receive a $100,000 upfront payment, as well as additional disbursements that would come as apartment complexes were sold, representing both lump sum payments and percentages of profit. Though Tzadik and Hendry paid Arguelles the initial $100,000, they haven’t paid him anything after selling the portfolio, according to Arguelles’ lawsuit. 

Arguelles took the issue to the American Arbitration Association in 2020. In February, the panel consisting of arbitrators Jerald Bagley, Manuel Farach and Norman Gerstein awarded Arguelles $8.9 million from Hendry and Tzadik. The amount represents nearly $8 million in payments due to Arguelles from the portfolio sales and $937,204 for attorney fees and costs.

Arguelles is now suing Hendry and 19 entities through which Tzadik owned the apartment complexes, seeking to enforce the arbitration court’s award. The suit was filed in Miami-Dade Circuit Court March 15. 

“Mr. Hendry has made millions of dollars” from the portfolio sale, said Raul Morales, attorney for Arguelles. Hendry “has not paid a dollar to my client.” 

Attorneys for Tzadik and a company representative didn’t return requests for comment. 

Court records shed light on how far the relationship between Arguelles and Tzadik has deteriorated. 

In the arbitration proceedings, they disagreed on when disbursements should be made to Arguelles following a property sale. Hendry argued that Arguelles would be paid after sale proceeds first cover other costs, including escrow holdbacks and liabilities. The panel of three arbitrators disagreed and sided with Arguelles. Under the settlement, Arguelles’ payment was due within 10 days from the disbursement of all sale proceeds, the panel said.

The panel also found Hendry and Tzadik’s affiliates in breach of the settlement. After the sale of three portfolios for a combined $299.3 million, Tzadik had no funds left in its accounts to pay Arguelles the amount he was owed, except for $5,000, the panel determined. That amount is significantly less than the $8 million Arguelles was owed under the settlement, according to a review of the agreement. 

Issues also emerged over a shared private jet. Because Arguelles transferred his ownership stake in the airplane to a Tzadik affiliate, he had the right to use $50,000 worth of flight credits, according to the lawsuit. But Tzadik’s entity sold the plane, meaning it now has to pay $50,000 to Arguelles in lieu of the flight credits, the panel ruled. 

Hendry levied counterclaims in arbitration court, with the panel agreeing with him that Tzadik had made a $52,000 salary overpayment to Arguelles. The panel excluded this amount from the final award to Arguelles. 

Hendry also argued that Arguelles broke a settlement confidentiality agreement. After his exit from Tzadik, Arguelles showed up at a company employee gathering at Fuego by Mana restaurant in North Miami Beach talking “about Hendry owing him money and wanting

to punch him in the face,” Tzadik staff members testified in court. But the panel concluded that none of the witnesses testified that Arguelles mentioned the settlement. 

Now that the case is in Miami-Dade Circuit Court, Hendry is again fighting back. 

In a motion to vacate or modify the $8.9 million awarded by the arbitrators, Hendry’s attorneys wrote that the arbitration process was “plagued by significant procedural and other lapses in its conduct and administration.” 

The panel had corrected its monetary award six times partly due to incorrect calculations, resulting in fluctuations in the final amount by roughly $2 million, according to Hendry’s motion. 

He again alleges Arguelles broke the settlement confidentiality provision, arguing that Arguelles revealed the settlement to his wife. Arguelles countered he had sent her the settlement for tax purposes, which is the only allowed disclosure of the settlement. But Hendry alleged this was a “last-minute” defense and that Arguelles’ wife didn’t handle the couple’s taxes. The arbitration panel was “prejudiced” against Hendry and the Tzadik affiliates by denying them a second deposition of Arguelles’ wife and a push to postpone the final hearing, according to Hendry’s court motion. 

“The arbitrators were grossly negligent in how they conducted the arbitration,” Hendry’s motion says. “None of this even addresses the fact that the damages amounts in the arbitration award … in many instances do not align with the evidence presented at trial or even the amounts requested by any of the parties.”

Morales, Arguelles’ attorney, takes issue with Hendry’s push to reverse the arbitration award. 

“Two of the arbitrators are some of the most respected jurists in Miami-Dade County,” Morales said. “Now they are trying to undo all of that.” 

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