Lending giant Citibank increased the financial pressure on embattled developer Kent Swig in recent court filings by seeking his shares in two modest properties in Chelsea and the Upper East Side in order to repay a debt of more than $5 million.
The bank wants Swig’s 50 percent interest in a three- and four-story mixed-use property at 212 Eighth Avenue at 21st Street in Chelsea (the first floor of which is home to the popular gay bar Rawhide) and a 20 percent interest in a five-story rental building with ground-floor retail, at 406 East 63rd Street, between York and First avenues, the two actions filed in New York State Supreme Court Nov. 25 say.
The lender, which declined to comment, filed the papers as a follow up to its July 2009 lawsuit that sought to recover money lent on an unsecured line of credit to the developer in 2006. In April this year, the bank declared that loan in default, and on Oct. 13, a New York State Supreme Court judge issued a judgment that Swig owed the bank $5.1 million.
The procedure to attempt to take control of a debtor’s assets is common. The filings by Citibank, known as turnover proceedings, are used to force an entity that holds an asset such as a stock, to turn it over to the bank, sheriff or marshal, legal experts said. Additionally, if the court issues a judgment in favor of the bank, the debt will become secured, giving it greater priority in a long line of Swig creditors.
The filings provide additional evidence that lenders are becoming more aggressive in recouping funds lent in the heady real estate bubble. Many loans made in that period included personal guarantees from developers to repay some portion of the loan in the event of a default. http://therealdeal.com/newyork/articles/going-after-borrowers-gets-personal
An attorney for Swig, Morrison Cohen partner David Scharf, who spoke on behalf of Swig, said the actions by Citibank were expected. He said the developer has been in negotiations with his lenders to restructure his debts for several months.
“We are in the process of working with all of Kent’s lenders on a global restructuring in order to maximize the amount of their recovery based on the total picture of assets and liabilities,” he said.
Scharf also said one of the lawsuits may be moot, because Swig may no longer own a 20 percent share of the property on East 63rd Street. The bank identified it as a Swig asset based on a personal financial statement Swig provided to the bank in April 2009, court filings say. But he may have sold or transferred that property since then, Scharf said.