Former Sheffield57 developer Kent Swig filed an appeal to the New York State Appellate Division to overturn a $28.4 million judgment issued in July on behalf of Square Mile Structured Debt, a firm led by investor Jeffrey Citrin.
In court papers filed earlier this year, Square Mile alleged that Swig defaulted on a $21.15 million personal loan issued in July 2007 to help finance the development of Sheffield57, a converted condominium at 322 West 57th Street.
Swig, in court records filed late last week, argues against the judgment, stating that the loan was to be converted into a stake in Sheffield57, and not be repaid in cash.
“The court below erred in finding that the complicated series of agreements between Swig and Square Mile constituted an instrument for the payment of money only which qualified for expedited summary judgment under CBLR 3213,” Swig said in the court filing. “The agreements between Swig and Square Mile were always intended by both parties to create a preferred equity investment, and not a loan.”
James Perkins, the attorney for Square Mile, was not immediately available for comment. Officials at Swig Equities, which manages his real estate holdings, were not immediately available for comment.
As first reported by The Real Deal, the loan was one of two made to Swig by Square Mile, with the default on the second $18.5 million loan scheduled for trial later this year, since there are issues that can only be settled at trial.
The second loan involved another one of Swig’s residential conversions, 25 Broad–The Exchange, a rental building in the Financial District that was being converted into a rental. Lehman Brothers filed suit to foreclose on that building in January and later appointed a receiver to take over the property.
The Square Mile appeal comes at a critical time both professionally and personally for Swig, since much of his debt involved personal guarantees that leave his personal assets subject to seizure or personal income subject to garnishment.
As The Real Deal reported earlier this month, Fortress Investment group acquired Sheffield57 in a so-called mezzanine auction for only $20 million, after Swig defaulted on hundreds of millions in mezzanine and senior mortgage loans.
Fortress acquired the senior mortgage and three mezzanine loans worth more than $130 million in June, including the senior mortgage loan held by Wells Fargo and the senior mezzanine loan from Guggenheim Structured Real Estate. Rose Associates, which originally sold the Sheffield to Swig and investors Yair Levy and Serge Hoyda in 2005, will officially return to the building as the managing agent next month.
Swig is also facing a lawsuit from Lehman Brothers, seeking a $50 million judgment for mezzanine loans at 25 Broad. Signature Bank and Citibank have recently filed suit against Swig to collect on a small personal loan and a line of credit.