Just a week before a looming deadline for the first closing at the luxury condominium conversion project at 45 John Street in the Financial District, the lender sued the developer for $51.7 million in defaulted loans at the project, court papers say.
The developer, Midtown-based Manhattan Capital, and its partner, a subsidiary of Deutsche Bank known as RREEF Global Opportunities Fund, were converting the 14-story loft building at John and Dutch streets into 84 luxury one- and two-bedroom units.
Lender Bayerische Landesbank, a German bank, filed suit in New York State Supreme Court June 22 to foreclose on the note, court papers say, claiming the developer had missed payments beginning in February.
“Borrower is in default of the note and has failed to cure its default despite due demands made by [the] plaintiff in writing on March 19, 2009 and June 15, 2009,” the filing says.
The sponsor was supposed to close the first sale by tomorrow, but will not meet that deadline, several buyers said. Agents from Corcoran Group Marketing, which was the marketing agent for the project, told the buyers that the sponsor would file an amendment with the Attorney General’s office to allow the buyers to rescind their contracts, and get their money back, the buyers said. The 45 John project is not listed on Corcoran’s new development Web page.
Listing prices for the units were between $585,000 and $1.825 million, according to Streeteasy.com.
The developer, lender and Corcoran did not respond to a request for comment.
Foreclosure lawsuits and rescission amendments have become more commonplace in the economic downturn. The Jasper at 114 East 32nd Street, also a conversion from a commercial building to a condo, was hit with a foreclosure lawsuit in March.
And at the Linden78, at 230 West 78th Street, buyers were given rescission rights in April.
Todd Matras, a 37-year-old attorney who with his wife placed a down payment to buy a $832,500 unit one-bedroom in July 2007 at 45 John Street, said Corcoran agents told him and other buyers that about 48 percent of the units had been sold.
In addition to the defaulted payments, the developer owes more than $2.1 million to contractors who have not been paid and have filed mechanic’s liens on the property, according to the New York county clerk’s office.
The firm with the highest value in liens is My Jamie Joseph Only, a plumbing, heating and air conditioning sub-contractor based in Flushing, Queens, that claims it is owed $1 million as of July 2008, the city records show.
One real estate transactional attorney in private practice, Sandor Krauss, who was not involved in the 45 John Street project, said once a loan was considered in default the sponsor should notify the buyers.
Several buyers said they had received no such notification.
Buyers said the 45 John Street Web site, which is down now, stopped functioning last week. Buyers had been given promises for months that closings would begin in the “next 30 or 45 days,” they said. Some asked not to be identified because they feared it would hurt their chances of getting their deposits back.
Although Matras the buyer said he was disappointed by the delays, he said the upside is he can probably buy a bigger place with the same amount of money because of the economic downturn.
“It is going to work out for the better. For what we paid for a medium one-bedroom we can probably get a small two-bedroom now,” he said assuming the rescissions will be granted.