The Real Deal New York

Judge denies Bauhouse’s bid to block 3 Sutton Place foreclosure sale

Court strikes down developer's request for injunction against lender Gamma Real Estate

February 23, 2016 06:05PM
By Rey Mashayekhi

3 Sutton Place

Rendering of 3 Sutton Place in Midtown (credit: Foster + Partners) (inset, from left: Joseph Beninati and Richard Kalikow)

A Manhattan judge has struck down Bauhouse Group’s request for an injunction against Gamma Real Estate and its planned foreclosure auction of Bauhouse’s 3 Sutton Place condo project.

The ruling means that Gamma Real Estate is, for now, allowed to proceed with a foreclosure sale of the 3 Sutton Place development site, at 428-432 East 58th Street in Midtown, currently scheduled for Feb. 29.

Bauhouse Group, led by Joseph Beninati, defaulted on nearly $129 million in loans last month that it had received from lender Gamma, led by Richard Kalikow, for its planned 68-story, Norman Foster-designed condo tower at 3 Sutton Place.

Bauhouse then filed suit in New York State Supreme Court against Gamma last week, and successfully received a temporary restraining order against the lender and its foreclosure auction of the site.

But the two sides met again in court on Tuesday, where a state Supreme Court judge lifted the temporary restraining order and ruled against Bauhouse’s bid for a preliminary injunction against the foreclosure sale, sources said.

It’s unclear whether Bauhouse will seek to appeal the ruling, possibly through the court’s appellate division. While Bauhouse’s lawsuit against Gamma was not dismissed and is still ongoing, the injunction sought against the foreclosure auction – which could very well see the developer lose control of the Midtown property – was a critical aspect of the complaint.

Representatives for Bauhouse did not return requests for comment, while representatives for Gamma declined comment.

Gamma has retained Eastdil Secured to market the 3 Sutton Place development site to potential bidders in advance of the foreclosure sale.

Bauhouse’s lawsuit against Gamma claimed the lender had made it “extremely difficult to access information” about the property in advance of the auction, with the goal of “chilling any bids” and assuring the lender was the sole bidder for the property.

Such difficulties included a confidential agreement implemented by Eastdil that “does not permit a bidder [on 3 Sutton Place] to give information about the project to his own lender” in advance of the foreclosure auction, Bauhouse’s attorney Stephen Meister told The Real Deal last week.

Gamma had provided Bauhouse with a roughly $127 million mortgage loan and a $20 million mezzanine loan to fund the planned 113-unit, 283,000-square-foot condo tower, which according to the developer’s complaint has an estimated market value “approaching $1 billion.”

Bauhouse has actively sought additional funding in recent months to finance the development, as TRD reported, as well as a joint venture partner to help bring the project to fruition. The developer received demolition permits for the Midtown site late last year.

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