Pure Development co-owner sues partner, seeks liquidation of company

(Adobe Stock photo)

Partners in one of central Indiana’s largest commercial development companies are fighting over the firm’s future amid one owner’s claim that the other has forced the departure of key staff and put hundreds of millions of dollars in potential business at risk.

Pure Development Inc. shareholder and principal Chris Seger filed a lawsuit last month in Marion County Superior Court against the company’s co-owner, Drew Sanders, asking the court to appoint a receiver to liquidate Pure’s parent company and affiliated fundraising business.

Seger alleges in his 22-page suit that Sanders’ demeanor and management style led a pair of key employees to depart Pure and at least two others to contemplate leaving after Sanders refused to grant them a formal ownership stake in the company.

Seger also says in the suit that Sanders does not “meaningfully contribute to the enterprise,” instead viewing the company as a “passive income stream for himself,” while also imperiling relationships with existing and potential clients due to “his personality and business approach.”

Sanders and Seger are each 50% stakeholders in Pure Holdings, the parent company of Pure Development, as well as equal partners in Pure Capital, a fundraising company affiliated with the development firm. Seger is asking the court to appoint a receiver for both companies and force a wind-down and liquidation of the firms.

“Sanders has a poor temperament, and he is condescending to employees and external partners,” the suit says. “He treats employees and external partners in a manner that is transactional, negative, frustrating, inappropriate, and disruptive—all of which has caused key employees to resign.”

An attorney for Seger said he is hopeful an out-of-court settlement will be reached in the coming weeks. He declined to share details about what such a settlement might look like.

“Our complaint details the facts as supporting our claim in the relief requested from the court, Indianapolis attorney Rob MacGill, counsel for Seger, said in a statement to IBJ. “Our hope is that the parties reach a negotiated resolution in the weeks or days ahead.”

Attorney Andrew Hull of Hoover Hull Turner LLP, who represents Sanders, did not return a call requesting comment.

Sanders and Seger founded Pure in late 2012 after working as executives on real estate development together at Duke Realty Corp. in the 1990s and 2000s.

To date, Indianapolis-based Pure has developed more than 35 mixed-use, industrial and office projects across the United States and has a contract with the Indiana Economic Development Corp. to lead efforts on the LEAP Lebanon Innovation and Research District.

The company ranked as the 10th-largest commercial real estate development firm in central Indiana, according to IBJ research, with 5,058,709 square feet of developments completed or under construction in 2023.

The company employs about 30 people, according to the suit.

In his lawsuit, Seger alleges Sanders has risked additional growth for the company by spurning Seger’s efforts to award two other principals in the company—his brother, Adam Seger, and Brian Palmer—each 5% common stock in Pure to match their profit interest in its operations.

According to filings, Sanders has refused those efforts for several years, which has led both Adam Seger and Palmer to consider leaving the company.

The lawsuit also says other employees have expressed concerns with Sanders in recent years, describing the executive as “a micromanager, untrusting, an impediment to progress, a nitpicker, uninformed about projects, ‘helicopter controlling,’ distracting, unpredictable, flaw-focused, elitist, unavailable, unengaged, not present, and intimidating.”

John Gaskin, who began working for Pure in 2013 and had been receiving a 5% profit interest, left the company in 2017, allegedly due to issues with Sanders. Tyler Morris, who joined the firm in 2018 and also had a 5% profit interest, departed in 2023 for the same reason.

Seger claims he hired an executive coach to work with Sanders on his “temperament, commitment, contribution, and management issues.” Sanders met with the coach on a weekly basis for two years before refusing any more coaching in late 2023.

“Sanders’ behavior has regressed and has caused a renewed air of discontent and dissension within the company and its key employees,” the lawsuit reads. “Sanders refuses to address, discuss, or correct his behavior.

The concerns, Seger alleges, extend to relationships with business partners, as well.

He “estimates that projects valuing at least $400 million are at risk due to Sanders’ inappropriate behavior, the enterprise’s deadlocks, and the current structure of the enterprise,” the lawsuit reads. “Losing projects such as these irreparably injures [Pure Development], and it prejudices … Pure Development’s ability to conduct [its] affairs to the advantage of the shareholders generally.”

Seger said specific efforts to remedy the strains in the partners’ relationship have been ongoing since January, with at least five meetings set on the topic. Sanders said most of those meetings resulted in Sanders refusing to engage on specific discussions related to ownership changes that would bring Adam Seger and Palmer into the mix.

After Seger informed Sanders they would need to terminate their business dealings due to lack of progress, Sanders skipped a fifth meeting involving the parties’ attorneys that had been slated for April 18, the suit claims.

The dispute over the future of Pure comes at a busy time for the company as it continues work as the master developer of the IEDC’s LEAP district in Boone County. The development to date has a sole public commitment, with Eli Lilly and Co. promising to spend as much as $9 billion on research efforts and manufacturing facilities. (LEAP stands for Limitless Exploration/Advanced Pace.)

Seger said in the suit the contract with the IEDC—which includes numerous responsibilities and is valued at $65 million—is still in place “despite the lack of contribution from Sanders,” who he claims has only brought one new business relationship to Pure in the past several years.

The development agreement, which was signed in December 2021 and renewed six times with additional payments, includes staffing for the LEAP district, contract management, oversight of land brokerage for the project.

Pure acts as the owner’s representative for permits and bidding of designs, leading marketing efforts, responding to requests for proposals for prospective users, infrastructure improvement management and various responsibilities tied to a new education center on the LEAP campus.

While the company will be paid an estimated $25.3 million from the IEDC as part of the most recent revision to the contract—it was paid more than $27 million for the fifth amendment, in August 2023—most of that money will be passed along to other contractors.

The contract has a cap of $10.5 million in contractor fees that Pure can be paid in 2024. The company is expected to  receive a management fee totaling nearly $707,000 (4% of the value of third party contracts), a utility infrastructure project management fee of $3.33 million (5% of all utility and infrastructure contracts, including those from the fifth amendment) and staffing retainers totaling $3.62 million, or $150,000 or more per month for two full-time employees.

It is also expected to receive a milestone bonus payment of $3.2 million for completing a master plan, finishing initial rezoning and environmental analysis, and the creation of a specific zoning ordinance for the LEAP district, along with $3.52 million in annexation fees, but those are classified under the 2023 cap of $10 million because of when the work occurred.

Another $2 million milestone payment is expected for Pure in the coming months after work is completed on certain infrastructure on the LEAP campus.

It’s so far unclear what the dispute over the future of Pure Development could mean for the company’s projects—both those already underway  like LEAP and others in the pipeline.

Seger, in his lawsuit, does not specify whether he might continue working with existing Pure clients through a new firm, and whether Adam Seger or Palmer would be involved in such a venture.

A representative for the IEDC said she doesn’t expect the dispute will have negative impact on the LEAP project.

“This is an internal company issue and has no impact on the continued development of LEAP,” Erin Sweitzer, IEDC’s deputy chief of staff and vice president of strategic external communications, said in a written statement.

In recent years, Pure has been involved in mixed-use developments throughout Midtown Carmel, as well as the revamp of buildings in the North Mass Ave. corridor of Indianapolis. It has also taken on multiple Denver-area projects of late.

On the industrial development side, the company has completed projects in Lafayette, Lebanon, Greenfield, Dayton, Ohio, and Ellisville, Mississippi. Its clients include BWI Group and GE Aviation.