The Real Deal New York

Project manager at former Miraval condo says sponsors owe him $472K

September 12, 2012 05:30PM
By David Jones

Square Mile founders Jeff Citrin and Craig Solomon and 515 East 72nd Street

The former project manager at 515 East 72nd Street, the condominium formerly known as Miraval Living, has filed a suit against the project sponsors, including Square Mile Capital. James Sheehan is alleging that the sponsors failed to pay him more than $472,000 in salary, bonuses and commissions after he was terminated, due to financial losses connected to the conversion.

The lawsuit alleges breach of contract and violation of state labor laws. According to the suit, Sheehan became the owners’ representative and project manager in 2005 under a joint venture between the original developers, C&K Properties and Zamir Equities. Those two companies acquired the former 408-unit rental building and converted it into a 331-unit spa condominium called Miraval Living.

Sheehan contends that the condo operated under a shell company called River Terrace, and that he was made an employee of Cooper Square Realty, the managing agent of the property, which would pay his salary, commissions and bonuses, and would be reimbursed by the sponsors.

In August 2007, Square Mile, which was initially the junior mezzanine lender, took “operational and day-to-day control” in a “friendly foreclosure” of the conversion, according to the suit. Sheehan signed a new agreement in April 2008 with Square Mile and an affiliate firm SM Asset Management that listed his $215,000 salary, a $25,000 bonus and $10,000 car allowance. That agreement also included a $250,000 bonus to be paid when the mortgage was refinanced, according to the lawsuit.

The Real Deal previously reported that Square Mile recapitalized Miraval Living, but the firm declined to comment on the financial condition of the property at that time.

Documents filed with the state Attorney General’s office failed to spell out any change in control of the sponsor entity during that year or discuss any change in financial condition. The handover of control to Square Mile Capital was also alleged in a 2008 suit by Coco Investments, an investor in the project, according to documents obtained by The Real Deal.

Sheehan alleged said in February 2011 the Witkoff Group and Westbrook Partners bought the property’s senior mezzanine debt from Brookfield Properties and entered a cooperation agreement with SM Asset. By October 2011, the debt was refinanced with M&T Bank, which he said would trigger the $250,000 bonus.

According to the suit when Sheehan was terminated in December 2011, Jim Derow, the new owners rep at the property and a principal at Square Mile, told him: “Don’t expect it. You won’t receive it. We lost all the money we put into the deal and are not about to pay more. I don’t care what your contract says.”

Sheehan claims that at the time of his termination, his annual contract was not set to expire until November 27, 2012.

A spokesperson for the sponsor, River Terrace, declined comment. A spokesperson for Cooper Square, also named as a defendant, said it was their policy not to comment on pending litigation. Lawyers for Coco Investments, were not immediately available for comment. Lawyers for Sheehan did not return calls.

Square Mile issued the following statement: “We do not believe Square Mile is liable in this matter, and we will seek to have ourselves removed from the litigation.”

As The Real Deal reported last month, the condo recently entered into a bulk deal to sell 14 apartments to Memorial Sloan Kettering Cancer Center.

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