Rye self-storage project collapses in partnership dispute

A Greenwich company has sued a joint venture partner for $4 million for allegedly backing out of a deal to develop a self-storage facility in Rye.

Elevated Storage Solutions accused LSC Development of fraud in a July 7 complaint filed  in U.S. District Court, White Plains.

The dispute concerns a 0.8-acre site on Nursery Lane, alongside Interstate 95 and next to Gagliardo Park in Rye.

Rye Country Boarding Kennels, the owner, had already obtained local governmental approvals for a self-storage facility with 328 units.

The owner offered to sell the property to ESS for $5.75 million in September 2021, according to the complaint. ESS paid a $287,500 deposit and agreed to make another $287,500 deposit after a due diligence period.

ESS designs and installs automated self-storage and parking facilities that hoist and place cars and contents into elevated slots.

ESS says it was not looking for a business partner but in March 2022 LSC Development, of Barrington, Illinois near Chicago, proposed a joint venture.

LSC, previously operating as Life Storage Centers, has acquired, developed and operated 85 self-storage properties, according to its web site.

LSC agreed to pay the second deposit, arrange financing to buy and develop the property, and pay the kennels $100,000 to extend the closing date, the complaint states. And it held out the promise of partnering on other projects.

LSC paid the second deposit, according to the complaint. But on April 5, 2022, Paul Bergin of LSC said he wanted to cancel the architectural contract and allegedly said LSC “does that all the time.”

“That was an ominous statement,” the complaint states.

Later that day, Chris Barry of LSC said the $100,000 closing fee would be wired immediately, according to the complaint. About two hours later, Barry told Nick Barile of ESS that LSC had decided not to close on the Nursery Lane purchase.

Barry said LSC would take full responsibility for the cancellation, the complaint states, and would give ESS a $287,500 credit on future projects.

ESS claims that LSC has refused to directly reimburse it for the deposit and that communications between the companies have been sporadic.

“LSC’s lack of responsiveness,” the complaint states, “convinced ESS that LSC was not sincere about partnering with ESS on the development of automated self-storage facilities or contributing to the construction of a prototype.”

The Nursery Lane property is back on the market for $7.5 million, through the Marcus & Millichap commercial real estate brokerage.

ESS accused LSC of fraudulent inducement, breach of contract and breach of fiduciary duty. It is demanding $4 million for lost profits, the deposit, and other costs. It is represented by Nassau County attorney Jonathan E. Neuman.

LSC did not reply to an email message asking for its side of the story.