An affiliate of Madison Realty Capital has sued Waterbridge Capital for allegedly backing out of an agreement to borrow $38 million to buy a Flatiron District office building.
The investment firm, through an entity called MRC RE Holdings LLC, is seeking $760,000 – the breakup fee required as part of an exclusivity provision in the agreement – as well as legal fees for the alleged breach of contract, according to the lawsuit, filed last week in New York State Supreme Court.
As part of its purchase of 119 West 25th Street, Joel Schreiber’s Waterbridge agreed to take the loan from Madison Realty, and then secured $32 million in financing from Midtown East-based lender Ladder Capital Finance instead, according to the suit. Working with another lender violated the terms of the initial loan commitment with Madison Realty, the suit said. The defendants are listed as Schreiber, who declined to comment, and two limited-liability companies affiliated with Waterbridge.
“The commitment letter had an exclusivity provision which provides that if the borrower or guarantor obtains funding from another source or sells, assigns [or] otherwise conveys the collateral that the borrower is responsible to pay Madison a breakup fee,” Madison Realty’s attorney, Jerold Feuerstein of the law firm Kriss & Feuerstein, said in a statement.
Waterbridge partnered with private equity firm Normandy Real Estate Partners to buy the 135,000-square-foot property for $50 million in July, as The Real Deal reported. The companies aim to redevelop it into a Class A office building with a ground-floor retail component. Normandy – which is overseeing redevelopment, property management and leasing at the site – declined to comment for this story.
The building, located between Sixth and Seventh avenues, has been at the center of a loan controversy before. Brooklyn-based investors Miriam and Michael Chen had acquired it for $34 million in 2006 but later defaulted on a $34 million loan granted to them by California-based lender Cathay Bank. A foreclosure judgment was issued against the property in September 2012.
The building was once home to an artist-run exhibition space named Silvershed.