The Real Deal New York

Swig withdraws bankruptcy court motion against Lehman in foreclosure case

February 10, 2009 05:17PM
By David Jones

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In an abrupt about-face, developer Kent Swig yesterday withdrew a request for documents related to Lehman Brothers’ foreclosure suits against his stalled condominium conversion at 25 Broad Street and his Nobu Hotel and Residences site at 45 Broad Street in New York’s Financial District.

“The Bankruptcy Court 2004 Discovery Motion is being withdrawn as a procedural matter as discovery against Lehman will now be achieved in New York State Supreme Court,” said a spokesperson for the two projects.

U.S. Bankruptcy Court Judge James Peck was scheduled to hear Swig’s arguments in a February 11 court hearing in Manhattan. The court is currently wading through a lengthy and complicated Lehman Brothers bankruptcy proceeding.

In January, Swig filed a motion in U.S. Bankruptcy Court seeking documents related to 25 and 45 Broad, where Lehman was the senior lender, before it filed for bankruptcy protection in September 2008. Swig, in the court filing, alleged that Lehman deliberately delayed the projects by refusing to approve the demolition of the south wing at 25 Broad.

Swig demolished the south wing at 25 Broad Street as part of a plan to transfer air rights to the Nobu Hotel site and open up additional air and light for the planned 62-story tower.

“To date, [25 Broad] has suffered substantial harm as a result of ongoing delays preventing completion of the project,” Swig alleged in the January court filing. “In particular, these delays have resulted in damages stemming from, among other things, purchasers’ rescission of contracts, a decrease in the value of the exchange, harm to [25 Broad's] reputation among the public and the filing of mechanic’s liens against the property.”

In yesterday’s court filing, Swig did not state a reason for the withdrawal, however government documents and numerous sources contradict the timeline alleged in the Swig filing.

The Real Deal previously reported that buyers were looking to bail out at the Exchange at 25 Broad Street prior to the Lehman bankruptcy. In June 2008, numerous buyers told The Real Deal that they would walk away from their contracts after Swig put them up in a hotel as he raced to restructure his condo plan.

In addition, records from the New York Department of Buildings, and interviews with current and former buyers, show that the south wing demolition was moving forward during the summer of 2008.

“There were a lot of people like me who got out right before re-signing [the new offering plan at 25 Broad] or got out after re-signing,” said one former condo buyer, who asked not to be identified. “I never felt like I was getting a straight answer.”

Lehman later filed suit in January seeking to foreclose on the Nobu Hotel site, claiming that Swig defaulted on a $37.7 million loan made in 2006 and an $11.5 million loan in 2007. Lehman separately filed to foreclose on 25 Broad Street, alleging he defaulted on a $231.7 million senior mortgage, a $19.7 million project mortgage and a $36.7 million project mortgage. Lehman alleged that Swig also defaulted by allowing $7.7 million in mechanic’s liens to be filed against the property.

Lehman Brothers officials declined to comment.

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