Stellar Management’s president, Laurence Gluck, is in negotiations to settle a lawsuit he filed against Landesbank Baden, Deutsche Hypo and State Street Bank after they allegedly cut off funding for his 178,000-square-foot office tower renovation at 1140 Avenue of the Americas.
“After the suit was filed [Jan. 27], the three senior lenders and the developer agreed to hold good faith confidential settlement negotiations in an effort to resolve the matter amicably,” said Gluck’s attorney Stephen Meister.
Gluck, one of the city’s largest real estate developers, asked for an injunction in January after the banks cut off millions of dollars in funding on construction and mezzanine loans for the 22-story building at 44th Street.
The suit, filed in New York State Supreme Court, alleges the three banks stopped funding a renovation project at the office tower, which included tenant buildouts, construction of a new glass curtain wall and other upgrades.
The banks are engaging in “predatory” lending practices so they can foreclose on the property due to their own “insolvency and desperate need for cash,” the suit says.
Several New York developers, including Maurice Mann, Kent Swig and Yair Levy have filed suit against lenders in recent months, alleging they either held back construction funds or demanded unreasonable payments to prevent a loan default. Mann was able to negotiate a settlement with his lenders, but Lehman filed suit to foreclose against Swig’s 45 Broad and 25 Broad, while Anglo Irish Bank filed suit to foreclose on Levy’s 225 Rector Place.
Stellar and its long-time partner Rockpoint Group acquired the 22-story office tower from SL Green in 2006 for $97.5 million, or $510 a square foot. Gluck financed the acquisition and planned renovation through a $116 million senior loan with Lehman Bros. In September 2006, the investment bank also agreed to make a $12.9 million mezzanine loan to Stellar.
Gluck says the lenders are holding back $40 million from the original senior loan and another $4.5 million from the original mezzanine loan, which he needs to pay for construction.
In the suit, Gluck claims that he provided a completion guarantee on both the senior and mezzanine loans, and received another $17.2 million in funding over the next two years. He adds, however, that in September 2008, the lenders stopped funding the construction and construction workers walked off the job. He alleges that the lenders now owe him $5.9 million for construction work that was already performed.
Gluck claims that one of his newly signed tenants, PSL Group America, has the right to walk away from its lease if the space it not delivered on time.
Lindsay Ornstein, a partner at Centric Real Estate Advisors said that PSL has moved into 1140 Avenue of the Americas, but noted that there is extensive construction remaining in several public areas, including the lobby. In 2008, PSL signed a 10-year lease for 15,000 square feet in the building and the company is slated to move in this year.
According to the CB Richard Ellis Web site, the entire seventh, ninth and 10th floors are available in the building, with each floor measuring 11,990 square feet. Another 3,700 feet is available on the 21st floor, while 4,500 feet is listed on the eighth floor. Rents are listed as negotiable.