Judge backs SL Green in 485 Lex. lawsuit

By Adam Pincus | June 24, 2010 06:45PM

A New York State Supreme Court judge threw out most of the legal claims raised in a breach of contract lawsuit filed by a frustrated buyer that was blocked earlier this year from closing on a minority stake in SL Green Realty’s Midtown office tower at 485 Lexington Avenue.

The would-be buyer, a partnership called Mazal 485 created by the firms Optibase and Gilmore International, sought to buy a 49.5 percent share in the building for $547 per square foot, but were blocked because the lender would not give approval by a specific contract deadline, court records say. The price was reportedly $504 million.

Mazal claims it was unreasonably prohibited from completing the deal, and filed a lawsuit against SL Green and several of its subsidiaries in February claiming breach of contract and breach of covenant of good faith and fair dealing.

Judge Bernard Fried issued his ruling yesterday, forcing the removal of a public notice of the lawsuit, called a notice of pendency, and also threw out the buyer’s demand that SL Green go through with the contract, court records show.

All that remained of the suit was the demand for repayment of the deposit, but, according to SL Green, it has already been repaid.

Y. David Scharf, a partner with Morrison Cohen, who represented Mazal, said Fried’s decision was flawed, and his client was considering options such as an appeal or a stay of the decision.

SL Green said the ruling was a victory.

“While it was unfortunate that the buyer chose this course of action after being unable to meet the lender’s conditions and the transaction couldn’t be completed, the court has verified that we fulfilled our obligations in seeking lender approval,” Andrew Mathias, SL Green president and chief investments officer, said in a statement.

Mazal 485 and SL Green signed an agreement Aug. 7, 2009 for Mazal to buy the minority share of the 30-story building, located between 46th and 47th streets. The sale price was reportedly $504 million.

As part of the sale agreement, the consent of lender Wachovia Bank, the master servicer of the $450 million securitized loan on the property, was required before Jan. 4, 2010, for the purchase to go forward.

But the approval was not given, in part because several new conditions including a $45 million reserve fund were added, court records show. Mazal suspected that because of a rebounding price of SL Green’s stock, SL Green was less interested in selling a portion of the property.

“The court overlooked that SL Green had an obligation to work to rein in CW [Capital’s] and Wachovia’s unreasonable conditions,” Scharf said.