The Real Deal New York

Rushmore developers set to challenge AG ruling in rescission case

April 15, 2010 08:06PM
By David Jones

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Lawyers for Carlyle Realty Partners and Extell Development, the sponsors of the Rushmore condominium on the Upper West Side, said they plan to challenge last week’s order by Attorney General Andrew Cuomo to refund the deposits of 41 buyers, according to a court filing obtained by The Real Deal.

In a letter to state Supreme Court Judge Debra James, lawyers for the sponsor, CRP/Extell, said they plan to file a so-called Article 78 that will challenge the AG ruling, and continue to argue that the disputed Sept. 1, 2008 rescission date was a “typographical error,” that should have been excused.

“The AG decision concludes that certain purchasers have a right of rescission based on an obvious typographical error in a single digit in the 757-page offering plan for the Rushmore,” said Simpson Thatcher attorney Laura Murphy, who represents the two companies.

The letter was in response to a demand by lawyers for Rushmore buyer Kelly Coffey to get documents and other evidence from CRP/Extell. Coffey, a managing director at JPMorgan Chase,  is not one of the 41 buyers that complained to the AG, but filed a lawsuit in state Supreme Court seeking a return of her deposit.

The 41 complaints were based on allegations that the developers missed a deadline to complete the building by Sept. 1, 2008. CRP/Extell argued that while the projected completion date was Sept. 1, 2008, it meant to state that the rescission date was Sept. 1, 2009, which is the way most offering plans allow for potential construction delays.

The 41 buyers are owed about $14.5 million in escrow deposits on $105 million in total apartment sales.

Lawyers for the Rushmore developers insisted that they would never write an offering plan without a 12-month window. But assistant AG Lewis Polishook wrote that the developer provided no evidence of a scrivener’s error, and note that the Avery, an adjacent building from the same developer at 100 Riverside, included a six-month rescission window in its offering plan.  CRP/Extell told the AG’s office that the Avery date was also a scrivener’s error.

The Real Deal also reported last week that in 2006, Extell offered a rescission to buyers at the Altair 20, a condo at 15 West 20th that missed a first closing deadline, without claiming there was any typographical error. That building later rescheduled its first closing and continued to sell units amid a boom in New York’s condo market.

The letter to James seems at odds with statements by Carlyle Group, the majority owner of CRP/Extell, which told The Real Deal this morning that it would consider claims from buyers who signed contracts at the Rushmore prior to Sept. 1, 2008 on a “case by case basis.” They declined to comment on whether there would be a new amendment to the offering plan that disclosed the rescission order.

Extell President Gary Barnett, however, did leave open the possibility of appeal in published reports last week.

In a statement released to The Real Deal yesterday, Carlyle officials downplayed the impact of the AG ruling.

“Our strong partnership with Extell has produced several remarkable buildings in Riverside South,” said Andrew Chung, a principal at Carlyle. “The Rushmore in particular is unaffected by the recent attorney general’s decision because we have quality, location and momentum.  Sales in the second half of 2009 were extremely strong with the trend continuing upward in 2010.  Furthermore in 2009, the Rushmore sold and closed more units than any other building in the Corcoran Sunshine Marketing Group portfolio. 

It’s an in-demand beautiful building that’s more than 65 percent sold and financing is readily available.” 

Richard Cohen, attorney for 33 of the buyers in the group seeking rescission, said the standard for overturning the AG’s ruling would be fairly high and the AG’s ruling must be proven to be based on a process that is “arbitrary and capricious.”

“A well thought out decision is rarely going to be overturned by a judge,” Cohen said. 

The AG’s office, Barnett and Murphy were not immediately available for comment.

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