The Real Deal New York

Magic Johnson’s firm wants to fire contractor at 20 Henry condo project

Investor claims delays in condo conversion threaten unit closings

July 17, 2012 02:00PM
By David Jones

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From left: Magic Johnson and a rendering of 20 Henry Street

A labor dispute between Hudson Meridian Construction and Magic Johnson’s Canyon Johnson Urban Funds is getting ugly. The contractor has threatened to walk off the job at the 20 Henry Street condominium conversion, leading the investment firm to ask a judge to kick them off the Brooklyn Heights site.

In a July 13 filing in Manhattan Supreme Court, the investment firm claims the project is more than five months behind schedule due to the construction company’s failure to supervise its workers and subcontractors. Canyon Johnson also says that Hudson Meridian is submitting inflated charges.

Lawyers for the investment firm allege that the construction company is demanding an additional $700,000 in payments or it will walk off the job by July 19, while 72 percent of the building’s 39 units are in contract and had been scheduled to to begin closing in June.

“Hudson Meridian’s efforts to extort additional payments from CJUF recently culminated with its audacious and unlawful threat to abandon the project,” Cole Schotz attorney Leo Levya, representing the developer, wrote in the filing.

Hudson Meridian lawyers told The Real Deal that the contractor has asked to be paid for changes in the work being requested and delays that were not its fault. “We vehemently deny that Hudson Meridian is responsible for substantial delays in the project,” attorney Daniel Katz, a partner at Rich, Intelisano & Katz, told The Real Deal.

The developer, in court papers, said it plans to bring in Staten Island-based A&D Construction to complete 20 Henry in place of Hudson Meridian, if the current dispute is not resolved.

“Even though we have every expectation that we will prevail in this lawsuit, we treat the lawsuit separately from our day-to-day business,” Canyon-Johnson officials told The Real Deal. “We have the funds available and in our control to complete the project. Furthermore, based upon correspondence from Hudson Meridian, we anticipate their full cooperation.”

The project has suffered through several delays since its inception. Urban Realty Partners originally acquired the former home of the Peaks Mason Mints candy factory and an adjacent site for $19.6 million in 2007, with plans to convert them into luxury condos.

Urban Realty was working with American International Group on the site. But in 2009 the troubled insurance giant sued, alleging the developers failed to cover cost overruns at the project and asked to take over the project. Sales halted at the project, which was offering condo apartments from $580,000 to $2.56 million, in March 2009.

The developers defaulted on a note with Bank of New York and Canyon Johnson bought the note at a discount in 2010, when about 15 percent of the project was complete.

Canyon Johnson drew sharp criticism for originally hiring Leviathan Construction Management to resume work at the site, with Councilman Steve Levin alleging that the firm has a history of safety violations.

By 2011, Hudson Meridian was brought into complete the project, with a contract that guaranteed the construction firm a maximum payment of $16.46 million.

Canyon Johnson owns more than $4 billion in real estate nationwide, including 6,200 residential units and 2.5 million square feet of commercial space.

 

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