The Real Deal New York

In Rushmore dispute, Extell, Carlyle ordered to post an additional $5 million bond

Judge says “respondents are clearly being deprived of the use of their money”

September 11, 2012 03:30PM
By David Jones

Clockwise from top left: Extell Development President Gary Barnett, the Rushmore and Carlyle Group co-founder William Conway (Rushmore image c/o CityRealty)

A State Supreme Court judge ordered Extell Development and Carlyle Realty Partners to post an additional $5 million on top of a previously posted $1 million bond until a final ruling is reached in the protracted legal dispute at the Rushmore condominium.

Extell and Carlyle, which developed the 289-unit condo at 80 Riverside Boulevard on Manhattan’s Upper West Side, had filed suit against former Attorney General Andrew Cuomo’s office to overturn a 2010 order that the developers refund $16 million in escrow deposits to 41 buyers. 

Until now, the developers have refused to refund the deposits — claiming they have a legal ‘stay’ on refunding the money until a ruling on the final appeal comes down from a New York state judicial panel; that ruling is expected by October according to legal sources.

“The respondents are clearly being deprived of the use of their money,” Judge Anil Singh wrote in the order released yesterday. “Under such circumstances, the undertaking must be increased to ensure the purchasers are made whole.”

The buyers demanded the refunds after Extell, the project’s lead developer, failed to close its first sales contract by September 2008. The developers countered that the offering plan was supposed to set a September 2009 deadline and that buyers took advantage of a single-digit typo. They claimed that the buyers were really trying to exit their contracts due to the collapse of the financial markets in September 2008.

Cuomo’s office said that if such a typo existed, the developers failed to correct the error through an amendment to the offering plan and that the buyers had no way of knowing such an error existed. The developers filed suit to overturn the Cuomo order in federal court, but lost that ruling and lost multiple appeals.

Singh previously ordered the developers to post the $1 million bond and the new $5 million judgment will bring the total bond to $6 million — covering 9 percent interest that dates back to the September 2008 deadline. The $16 million in escrow funds are being held by Stroock, Stroock and Lavan, the law firm that wrote the Rushmore offering plan for the developers. The deposits cover apartment sales of about $110 million.

The buyers filed papers earlier this year demanding the additional interest payments as a way to ensure that money would be readily available if they win the appeal.

Lawyers for the buyers said they were “pleased” by the ruling, and felt the deposits were being wrongfully withheld. Carlyle and Extell officials declined to comment. A spokesman for AG Eric Schneiderman declined to comment.

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