Developer Joseph Moinian reached an impasse in a high-profile battle to block Deutsche Bank and Related Cos. from foreclosing on his 3 Columbus Circle office tower and demolishing the property in favor of a new tower anchored by Nordstrom’s department store.
Related Chairman Steve Ross and lawyers for Moinian squared off this morning in New York State Supreme Court, while the two executives sat impassively in the front row, watching what amounted to a legal sparring match with Judge Charles Ramos repeatedly injecting a wry sense of humor to keep the showdown from turning into a three-ring circus.
“This is probably the most egregious case of predatory lending I’ve ever seen,” Moinian attorney Stephen Meister, a partner at Meister Seelig and Fine, told the judge in his opening remarks.
Ramos, standing on the bench, his hands resting on the back of his leather chair, replied: “I thought the last one was?” as a howl of laughter erupted from courtroom observers, referring to a previous case Meister had before the judge.
Meister, in a $200 million lawsuit filed in October, alleges that Deutsche Bank engaged in a predatory scheme with Related to foreclose on a delinquent $250 million mortgage loan at the 26-story building. Meister claims the lenders blocked Moinian from renting the property to potential tenants and sold the note to Related so it could redevelop the property without paying the full value of a ground-up construction.
Meister conceded that the building, formerly known as 1775 Broadway, is only 20 percent occupied since the 2009 departure of Newsweek magazine, but claimed that CWCapital, the special servicer of the loan, refused to approve potential lease agreements with the William Morris agency and HQ Global Headquarters, because Related wanted to take over an empty building before demolishing the property in favor of a new tower anchored by the city’s first Nordstrom‘s department store.
In October, Moinian reached an agreement with SL Green to help pay off the $248.7 million loan balance and block the foreclosure, which was filed in September, but Meister alleges part of the alleged scheme was for the lenders to demand a $54 million prepayment penalty on top of the original loan amount before the loan could be made current. Meister notes that the loan, originally taken out in 2006, was not scheduled to mature until 2016.
Meister asked the court for a restraining order that would temporarily block the foreclosure, but allow Moinian to post a bond that would protect the lenders and make sure they got paid off.
Attorney Mark Walfish, representing Deutsche Bank and Related in the case, argued that the lawsuit was a “smokescreen“ designed to divert the court‘s attention from the fact that Moinian allowed eight months to pass before allegedly “manufacturing” some sort of emergency that required the court to issue an injunction against the foreclosure sale, which he said was allowed under the loan documents.
“They sat back for eight months and did absolutely nothing, and now they come back eight months later and ask for emergency relief,” Walfish said. “You’ve got to be kidding.”
After more than an hour of listening to the lawyers interrupt each other, the judge ordered the two lawyers back into his chambers to negotiate some sort of compromise, then called in Moinian and Ross to join the discussions. After another series of negotiations in chambers, the talks broke down and Ross was hustled out of the courtroom with fellow executives.
Asked about the tenor of the discussions, Meister said the two sides were “not close” to reaching a compromise and he said he planned to file a “motion for summary judgment,” which would allow the judge to rule on the entire $200 million lawsuit without a full trial. Spokespersons for Moinian and SL Green declined to comment, and a spokesperson for Related did not return a request for comment.