Airbnb sues Hernandez over Niido deal

George Sell George Sell Uploaded 03 February 2020

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US: Airbnb has filed a lawsuit against NGD Homesharing and its CEO Harvey Hernandez, claiming it stole funds and made unauthorised loans to other companies.

Airbnb and Hernandez originally teamed up to work on Airbnb-branded apartments in Kissimmee, Florida - his company bought and rebranded the apartments which were designed "to attract young renters who work part-time in the Orlando area and live elsewhere the rest of the year, but want to make money from subletting rooms or entire apartments when they aren't in town".

In October 2017, Airbnb and Hernandez announced plans for the 324-unit apartment complex, near Walt Disney World, which was intended to open in early 2018, and would have been the first in a series of developments branded Niido Powered by Airbnb. Tenants would be encouraged to rent out their units for up to 180 nights each year. Niido would provide an Airbnb-integrated app and take a management fee.

Airbnb now says that Hernandez violated a January 2019 agreement and stole at least $1 million.

Its lawyers filed a suit in San Francisco federal court last week against NGD Homesharing and CEO Harvey Hernandez. The suit alleges that “NGD and Hernandez stole funds, made unauthorised loans to other Hernandez-controlled companies, fraudulently backdated documents, breached contracts, and then lied repeatedly in an attempt to cover their tracks".

The complaint also says: “NGD utterly failed to deliver on the core purpose of this partnership: creating more homesharing accommodations for the Airbnb community, particularly in urban, multi-family buildings.” Airbnb is seeking to terminate the relationship and recover its investment.

Attorney Michael G. Austin, who is representing NGD Homesharing, described the lawsuit as “baseless” and “factually inaccurate” and accused Airbnb of “attempting to use its size (and litigation tactics) to improperly usurp an innovative business.”

NGD has since launched a counter suit, alleging that Airbnb "has been engaging in a pattern of disruptive, dilatory, tortious and bad-faith actions inconsistent with, and in violation of the legal and contractual obligations Airbnb owes to NGD."

The NGD suit also alleges that Airbnb "is also misappropriating NGD's confidential business information and trade secrets for the benefit of Airbnb's competing interests, and tortiously interfering with NGD's valuable business relationships".

According to the complaint, the relationship between Airbnb and Hernandez goes back to 2016 when Airbnb loaned his real estate development company $1 million to explore homesharing-friendly properties. Hernandez’s Newgard Development Group has built several hotels and residences around Miami.

The complaint says that in January 2019, Airbnb invested $11 million with Hernandez in exchange for a commitment to open seven real estate projects in 2019 and another seven in 2020.

The company didn't open any last year and operates just the original two - the initial Kissimee project and another in Nashville.

“We really wanted to have Niidos in every major city in the US, but there are a ton of regulatory challenges in cities where we want to have a presence,” said Hernandez in June 2019. That month he launched the Natiivo brand, also described as "powered by Airbnb".

"Natiivo fills a gap in the hospitality landscape by combining an elevated, professionally-hosted experience, great design and cutting-edge technology with the service, security and consistency of a great hotel," said Hernandezat the time. "First and foremost, it's designed for guests who crave a more authentic experience while traveling, but also offers prospective buyers flexible ownership to match their lifestyle."

The company said Airbnb would provide design consultation for common areas and interiors of new units to create a property optimal for home sharing. "Natiivo will create spaces for local Airbnb Experiences hosts to share their passions with owners and guests, and Natiivo owners will be permitted to home share individual rooms or their entire units through Airbnb. Unit owners (hosts) who choose to share their units will be part of Airbnb's Friendly Buildings Program, in which hosts and property managers share revenues generated from home sharing. NGD Homesharing will retain management of the buildings," it said.

 

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