A New York State Supreme Court panel has upheld a summary judgment against developers Laurence Gluck, Steve Witkoff and Westbrook Partners for failing to close on an office building at 405 Park Avenue in 2009.
The decision brings to a close a three-year legal saga that saw the three developers, working under a partnership named 405 Park LLC, pitted against the building’s owner Donerail Corporation. The partnership made a deal with Donerail to buy the building in 2007, but later reneged. The dispute centered on a $38.5 million deposit paid by 405 Park LLC to Donerail prior to the arranged closing date. Donerail, which still owns the 17-story office building, can now retain the deposit, the judge ordered.
According to legal documents, 405 Park LLC first entered into an agreement to pay Donerail $178.5 million for the 136,000-square-foot tower in June 2007. The partnership then transferred $38.55 million as a deposit to Donerail. According to the purchase contract, if 405 Park failed to complete the purchase for any reason other than Donerail’s default, Donerail was to entitled to receive liquidated damages for the breach of the agreement in the form of the total amount of the deposit.
The closing was later postponed five times; it was initially slated to take place in January 2008, but, after a number of extensions, the final closing date was set for June 2009. During the two-year period between the contract date and the closing date, the market crashed. At the closing table, chaos ensued. All of the parties involved reportedly walked out after trying to renegotiate the deal several times.
Donerail alleged that the buyer had decided to walk away from the deal because it became more financially advantageous to do so. According to Donerail, if 405 Park LLC were to have purchased the building, it would have stood to lose upwards of $90 million. Alternatively, if 405 were to renege on the contract, its liability was much less –- the $38.5 million deposit plus $600,000 in accrued interest.
In a later legal action taken against Donerail, 405 Park LLC claimed that Donerail had failed to deliver an unencumbered title. The Supreme Court Judge panel took on the partnerships claims in its decision, saying: “405 Park’s alleged concerns were not reasonable, and appear to be pretextual, particularly in light of its expressed desire not to close.”
Steven Meister, the lawyer for the buyers, was not immediately available for comment.
The attorney for Donerail, Michael Lynch of Kelley Drye & Warren, said in a statement: “405 Park aggressively pursued these claims, but it was clear from the facts that they were always looking for a way to exit the agreement and force Donerail to refund the deposit. [They] never intended to close on this transaction.”
The partnership has the option to appeal the decision, Lynch said.