510 Madison Avenue, Harry Macklowe of Macklowe Properties (top) and Marc Holliday of SL Green (bottom)
A week after fending off a foreclosure action at 510 Madison Avenue, developers Harry and William Macklowe and real estate investment trust SL Green Realty are facing a lawsuit from another industry heavyweight that wants a piece of a $65 million insurance payment.
O’Connor North American Property Partnership, led by Jeremiah O’Connor, filed suit against Macklowe Properties, alleging breach of contract, and SL Green, alleging breach of contract and unjust enrichment for allegedly failing to share the insurance proceeds stemming from the massive 2009 fire at 510 Madison.
The 510 Madison building has been embroiled in controversy for years. It was one of the last commercial buildings in the Macklowe Properties portfolio after the developer was forced to sell off the trophy General Motors building in 2008 help pay off billions of dollars in debt.
The February 2009 fire gutted the building’s curtain wall and caused extensive smoke and water damage in other parts of the office tower. O’Connor, the junior mezzanine lender, claims it is owned about $1.5 million in interest payments for each of the 12 months that the tower was delayed, or more than $18 million.
“The distribution of insurance proceeds to date has included distribution of additional interest expense to the senior lender and the first mezz lender,” wrote Allen & Overy attorney Jacob Pultman, who is representing O’Connor. “To date, the additional interest expense that was due plaintiff has not been paid, directly or indirectly, despite plaintiff’s repeated demands,” wrote Allen & Overy attorney Jacob Pultman, who is representing O’Connor.
Lawyers for Macklowe Properties said the Macklowes had no control over the funds so they could not disburse the proceeds of the insurance payments.
“The suit against the Macklowes has no merit because we don’t have a penny of the insurance money in our possession,” said Stephen Meister, an attorney for Macklowe.
The suit is the latest twist amid an ongoing battle between Macklowe and SL Green over 510 Madison, a new building that includes a pool, health club and garden terrace. In March, Macklowe filed suit to block SL Green from what it called a predatory foreclosure on the building, after SL Green bought the senior mortgage and the senior mezzanine loan.
The debt on the building had been scheduled for an April 20 foreclosure auction, in which SL Green was widely expected to win.
In addition, newly released documents show that CB Richard Ellis received a subpoena March 31 from SL Green, however the commercial brokerage asked the court for more time to respond. A hearing is set for May 4. CBRE officials were not immediately available for comment.
Macklowe and SL Green officials declined to comment.