The developer of San Diego’s expansive waterfront research campus is facing a fraud lawsuit from one of its earliest investors. In a civil complaint filed with the Delaware Court of Chancery, a unit associated with multifamily housing developer Aimco accused San Diego-based life science real estate investment firm IQHQ of deception in securing an equity investment that is now deemed worthless. The complaint alleges fraud, breach of contract, and mismanagement on IQHQ’s part, with Aimco seeking a refund of its investment and a court-ordered audit of IQHQ’s financial records.
IQHQ has vehemently denied any wrongdoing, with Chris Brewer, the general counsel for the company, dismissing the allegations as baseless and without merit. The lawsuit provides a rare glimpse into IQHQ’s operations, revealing its rapid growth since its inception as Creative Science Properties in 2019. The firm attracted significant investment to develop extensive life science facilities in key biotech hubs like San Diego, where it constructed the 1.7 million-square-foot Research and Development District (RaDD) that currently sits mostly vacant.
Aimco, based in Denver and in the process of divesting its assets, initially invested $50 million in IQHQ in 2020. By 2022, IQHQ repurchased 22% of Aimco’s stake for $16.5 million, resulting in a valuation of $59.7 million for Aimco’s remaining investment. However, Aimco reduced the value of its equity to $12.7 million in June 2024 due to escalating real estate development costs and concerns about IQHQ’s financial stability.
The complaint alleges that Aimco was misled into investing in IQHQ under false pretenses, particularly regarding partnership opportunities on projects with residential components. Despite Aimco’s desire to cash out in 2022, IQHQ allegedly pressured the company into transferring its shares to a new entity, failing to deliver on promises of multifamily opportunities as initially agreed.
Furthermore, Aimco claims that IQHQ withheld crucial information about its dealings with other housing developers, refused to disclose financial details upon request, and inflated the value of company shares during the 2022 restructuring. The lawsuit suggests that internal management and affiliates profited at the expense of investor equity through various fees and transactions, while neglecting Aimco’s interests.
The legal action sheds light on IQHQ’s financial challenges, as evidenced by continuous fundraising efforts and indications of severe financial distress relayed to investors. Despite IQHQ’s public claims of substantial equity and corporate financing, its financial stability is under scrutiny, with potential strains on access to capital looming. Notably, IQHQ has only secured one research tenant for its RaDD project, raising concerns about the company’s prospects moving forward amid limited leasing activity and market uncertainties.
