Fortis, lender trade barbs on leaning tower mediation

Fortis Property Group and Valley Bank have agreed, in theory, to play nice.

In separate letters to Judge Barry Ostrager, the companies expressed a willingness to try mediation again on the stalled 161 Maiden Lane skyscraper. But they also took jabs at each other and laid out different terms for any talks. 

Judge Barry Ostrager last week had urged the parties to attempt mediation again after they abandoned negotiations last year to resolve litigation surrounding Fortis’ 60-story Financial District tower, which has been in limbo since it was discovered to be tilting.

The bank is seeking to foreclose on a $120 million loan on the troubled Seaport Residences, accusing the developer of missing critical deadlines. Fortis is suing the lender right back, alleging it wrongfully stopped funding the project and prevented the tower’s timely completion.

In its letter, Fortis indicated it would be willing to re-enter mediation. It states that Fortis has repeatedly tried to rekindle such negotiations, to no avail, as the lender “repeatedly declined.”

The company also said it was open to another request by the judge to establish a fund to pay several contractors left in the lurch as project progress stalled and various lawsuits dragged on. But it said “the vast majority of such funding” should come from Valley Bank. Fortis claimed it has paid more than $40 million since September 2018 to cover project costs.

“The senior lenders have not funded a dime on this project since early 2019. In fact, the whole point of Fortis funding $20 million in March 2020 was in exchange for lenders’ agreement to release additional loan proceeds to pay vendors,” the letter states.

In Valley Bank’s letter, the lender’s attorney fired back at Fortis’ version of events.

“The Fortis Parties’ attempt to blame [lenders] for unfruitful previous mediation efforts reveals an astonishingly warped, but patently self-serving, recounting of what actually transpired,” the letter states.

Valley asserted that the parties agreed to keep discussions with the mediator confidential, but Fortis failed to do so.

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The bank also indicated that it opposes the creation of a fund for unpaid contractors, something the judge said should be a condition of mediation. Its letter states that the stiffed contractors should be paid with money from the eventual foreclosure sale. It notes that Valley Bank has contributed the most funds to the project to date.

Successful mediation could bring to a close more than three years of litigation between the lender and developer, and determine the fate of the unfinished condominium. The project has faced years of delays, plagued by various legal fights between the developers and its contractors.

The cause of the tower’s leaning three inches to the north and the parties responsible for it have yet to be determined. One suspect is the method used to lay the building’s foundation.

In its letter, Valley Bank asked that it be given until Sept. 29 to enter filings related to mediation. Given the tenor of these letters, the parties appear to have their work cut out for them.