A former real estate agent for Swig Equities filed a $486,000 lawsuit against the company, alleging that the developer owes her more than two years in unpaid commissions plus other fees. The suit also claims that the company abandoned the original condominium conversion plan at 25 Broad Street after New York State regulators began to question whether some condo purchasers from Latin America planned to live in the building.
Alison Root, the former agent, claims the company owes her $243,000 in commissions for the sale of 32 apartments, plus an additional $243,000 in compensatory damages plus interest, damages for unjust enrichment, attorney’s fees and other costs, according to the suit filed in New York State Supreme Court.
Root, whose attorney said her client would not comment for the story, further alleges that in November 2007, the developer tried to persuade a “substantial number” of condominium buyers to falsely claim they planned to live in their new apartments. Under New York State regulations, newly converted condominiums must sell at least 15 percent of their apartments to so-called bona fide owner-occupants, before the plan can be declared effective.
A 25 Broad spokesperson responded to the lawsuit by calling it “entirely baseless,” noting that the developer will vigorously defend itself against the allegations.
According to the suit: “After the Part 23 plan was submitted for approval, the [New York State] Attorney General ‘s office informed Swig Equities that it intended to interview some of the purchasers who lived outside of the United States. The purpose of the interviews … was to ascertain, among other things, whether these non-U.S. purchasers were in fact planning to live in units they were purchasing.”
In June 2008, after rescinding the original contracts, Swig removed
about 15 buyers that had been living in the building under interim
leases and put them up at the Millenium Hilton, as The Real Deal
previously reported. He later submitted a new plan and allowed buyers a
chance to sign up under the new offering plan. Most of the 15 buyers resigned under the new plan, and several still live in the foreclosed building under interim leases.
In 2005, a partnership between developer Kent Swig, head of Swig Equities, and Colonnade Properties acquired 25 Broad Street from Bruce Menin’s Crescent Heights for $260 million with plans to convert the 346-unit rental building into a luxury condo. As previously reported by The Real Deal, Swig had 52 apartments in contract in early 2008, but delays at the project led numerous buyers to either demand their money back or threaten to walk away from the project altogether.
Miami-based Fortune International Realty entered a deal to become Swig’s exclusive broker for the Latin American market, the court documents state. Root claims that in 2007 she traveled to Bogota, Columbia, to market the building and that in October 2007, several investors signed deals to buy property at 25 Broad.
“In the fall of 2007, now realizing that Fortune was bringing in reliable buyers, Swig Equities began to put some pressure on Fortune to sell more units to Latin American investors because the deadline for meeting the 15-percent owner-occupied threshold was approaching,” the suit alleges.
Root claims that in early 2008, Swig abandoned the offering plan, telling purchasers that the reason was related to construction in the south wing of 25 Broad, which was being demolished in preparation for Swig’s Nobu Hotel project.
The sales office at 25 Broad Street was shut down in October 2008, less than a month after Lehman Brothers, the main lender on the conversion, filed for bankruptcy protection. Root alleges she was notified of the decision on October 7 and was told she would be terminated.
In January, Lehman Brothers filed suit to foreclose on 25 Broad Street, alleging Swig defaulted on a $231 million senior mortgage loan, a $19.7 million project mortgage and a $36.7 million project mortgage. Swig also allegedly defaulted on $7.7 million in mechanic’s liens.