A rendering of Madelon Group and Blue Room’s planned micro studio apartments near the Santa Fe Arts District. The project has never broken ground. (The Denver Post)
A local hedge fund claims that a “grossly incompetent” New York developer and its useless software have wasted time and money as it tries building studio apartments.
Madelon Group, of New York, specializes in modular homes and prefabricated buildings. It developed and operates a few small apartment buildings in New York City. Since 2019, one of its investors has been Minyoung Sohn, founder of the Denver fund Blue Room.
Sohn said that he decided to invest in Madelon because of REDtech, a software program that Madelon created. REDtech “democratizes development,” Sohn was told in 2019, by using public data to create blueprints and calculate the financial needs for apartment projects.
“Literally all you have to do … is put in the address, put in the price, it automatically creates a code-compliant floor plan for you, so you don’t even need to consult with an architect,” Madelon co-founder Dane Andrews told Sohn at a pitch meeting, the latter man claims.
Sohn wasn’t alone in being enticed by REDtech. Leslie Herod, who ran for mayor last year, vowed in March 2023 to use the software when building apartments on 80 vacant city lots.
“This is the future of affordable housing and Denver can lead the way,” Andrews said then.
But Herod lost the election and a first test for REDtech in Denver is ensnared in litigation.
In early 2022, Sohn and Madelon decided to take their partnership farther and use REDtech to build micro studio apartments above ground-floor retail space at 801 W. 8th Ave., in the Lincoln Park neighborhood. Blue Room would raise money; Madelon would develop.
801 8th Ave. in Lincoln Park is currently occupied by a seller of antique auto parts. (Justin Wingerter/BusinessDen)
There were some initial successes. The firms bought 801 8th Ave. and an adjacent property at 813 Inca St. for a combined $1.3 million in 2022 and raised a quick $1 million that September. Then came a $500,000 grant from the Colorado Health Foundation and a $450,000 grant from the Kaiser Foundation, two nonprofits looking to fund income-restricted housing here.
But the project has never gotten off the ground. Instead, Madelon sued Sohn and Blue Room in March, accusing them of pushing Madelon off the project, keeping the purchased properties for themselves, and misappropriating grant money as part of a fraudulent “shell game.”
Then, in late August, Blue Room responded by accusing Madelon of fraud and negligence.
“Madelon and Mad City were grossly incompetent in managing all aspects of the project,” Blue Room alleged in its Aug. 30 countersuit, referring to Madelon’s LLC for the project.
“Their mismanagement resulted in significant delays, massive increases in the budget, and frustrated key partners,” according to that countersuit. “With time, it became increasingly clear that the project would not be viable with them acting as developer.”
REDtech drew up plans that were not code-compliant and financials that were not usable, Blue Room says. “Virtually everything REDtech was supposed to be able to do had to be done by an architect and other professionals, significantly increasing the project cost.”
Initial plans for the 72-unit building were downscaled to 64 units and, when that still wasn’t compliant with zoning laws, down to 54 units. The project has not broken ground.
Sohn wants the $350,000 that he invested in Madelon returned, believing he was misled about REDtech’s capabilities, and wants uncalculated damages for Madelon’s supposedly shoddy development work. A trial in the Denver District Court case has not been scheduled.
Madelon is represented by the attorney Blake Gansborg with Nelson Mullins Riley & Scarborough in Denver, who did not answer requests for comment on the countersuit.
Blue Room is represented by Glen Summers in the Denver office of Bartlit Beck.
A rendering of Madelon Group and Blue Room’s planned micro studio apartments near the Santa Fe Arts District. The project has never broken ground. (The Denver Post)
A local hedge fund claims that a “grossly incompetent” New York developer and its useless software have wasted time and money as it tries building studio apartments.
Madelon Group, of New York, specializes in modular homes and prefabricated buildings. It developed and operates a few small apartment buildings in New York City. Since 2019, one of its investors has been Minyoung Sohn, founder of the Denver fund Blue Room.
Sohn said that he decided to invest in Madelon because of REDtech, a software program that Madelon created. REDtech “democratizes development,” Sohn was told in 2019, by using public data to create blueprints and calculate the financial needs for apartment projects.
“Literally all you have to do … is put in the address, put in the price, it automatically creates a code-compliant floor plan for you, so you don’t even need to consult with an architect,” Madelon co-founder Dane Andrews told Sohn at a pitch meeting, the latter man claims.
Sohn wasn’t alone in being enticed by REDtech. Leslie Herod, who ran for mayor last year, vowed in March 2023 to use the software when building apartments on 80 vacant city lots.
“This is the future of affordable housing and Denver can lead the way,” Andrews said then.
But Herod lost the election and a first test for REDtech in Denver is ensnared in litigation.
In early 2022, Sohn and Madelon decided to take their partnership farther and use REDtech to build micro studio apartments above ground-floor retail space at 801 W. 8th Ave., in the Lincoln Park neighborhood. Blue Room would raise money; Madelon would develop.
801 8th Ave. in Lincoln Park is currently occupied by a seller of antique auto parts. (Justin Wingerter/BusinessDen)
There were some initial successes. The firms bought 801 8th Ave. and an adjacent property at 813 Inca St. for a combined $1.3 million in 2022 and raised a quick $1 million that September. Then came a $500,000 grant from the Colorado Health Foundation and a $450,000 grant from the Kaiser Foundation, two nonprofits looking to fund income-restricted housing here.
But the project has never gotten off the ground. Instead, Madelon sued Sohn and Blue Room in March, accusing them of pushing Madelon off the project, keeping the purchased properties for themselves, and misappropriating grant money as part of a fraudulent “shell game.”
Then, in late August, Blue Room responded by accusing Madelon of fraud and negligence.
“Madelon and Mad City were grossly incompetent in managing all aspects of the project,” Blue Room alleged in its Aug. 30 countersuit, referring to Madelon’s LLC for the project.
“Their mismanagement resulted in significant delays, massive increases in the budget, and frustrated key partners,” according to that countersuit. “With time, it became increasingly clear that the project would not be viable with them acting as developer.”
REDtech drew up plans that were not code-compliant and financials that were not usable, Blue Room says. “Virtually everything REDtech was supposed to be able to do had to be done by an architect and other professionals, significantly increasing the project cost.”
Initial plans for the 72-unit building were downscaled to 64 units and, when that still wasn’t compliant with zoning laws, down to 54 units. The project has not broken ground.
Sohn wants the $350,000 that he invested in Madelon returned, believing he was misled about REDtech’s capabilities, and wants uncalculated damages for Madelon’s supposedly shoddy development work. A trial in the Denver District Court case has not been scheduled.
Madelon is represented by the attorney Blake Gansborg with Nelson Mullins Riley & Scarborough in Denver, who did not answer requests for comment on the countersuit.
Blue Room is represented by Glen Summers in the Denver office of Bartlit Beck.
