Moinian sues Deutsche and Related over Columbus Circle tower takeover

TRD New York /
Oct.October 26, 2010 06:45 PM
From left: Joseph Moinian of the Moinian Group; 3 Columbus Circle; Stefan Krause, CFO of Deutsche; and Stephen Ross, CEO of Related

The Moinian Group, led by developer Joseph Moinian, filed a $200 million suit against Deutsche Bank and the Related Companies, alleging the companies engaged in a predatory scheme to take over his financially troubled office building at 1775 Broadway, which Moinian recently renamed 3 Columbus Circle.

Moinian, in the suit filed in New York State Supreme Court, claims that Related executives admitted their plan to snatch the building in a “loan to own” deal and that Deutsche, which is helping finance the deal with Related, prevented Moinian from paying the true loan balance and tried to force him to pay a prepayment penalty of $54 million.

“Lender’s demand for a bogus prepayment charge is designed to accomplish defendants’ predatory goal — stealing the property from Mr. Moinian,” wrote Steven Meister, attorney for Moinian.

Lawyers for Related denied the charge and urged Moinian to pay the money that they say he owes on the loan.

“Our client believes that the lawsuit is totally without merit and is designed to excuse the borrower’s default in its mortgage obligation,” said Mark Walfish, attorney for Related. “They look forward to having their position vindicated in the courts. In the meantime they hope that the plaintiff will fulfill its obligations in full on the mortgage, which has been in default since January and pay approximately $310 million owed on the loan.”

Deutsche declined to comment.

According to the complaint, filed Monday night, Moinian bought 3 Columbus Circle in 1999 and just about emptied the 777,000-square-foot building out for a $100 million renovation, which included a new glass curtain wall, new lobby with entrance on Broadway, new roof and upgraded mechanical systems. He refinanced the loan with one for $250 million from Wachovia Bank, the latter of which was scheduled to mature in 2016, but has been sold or reassigned multiple times since then.

In June 2006, the loan was acquired by Wells Fargo Bank, the trustee for a mortgage-backed security and in 2009, Bank of America took over for Wells as the trustee for that security. By January 2010, the Bank of America called in a default alleging Moinian failed to pay the January 2010 debt service and transferred the loan to CW Capital for special servicing.

Moinian claims he had asked the lenders in January 2010 to negotiate a restructuring of the loan, which would include a forbearance on principal or smaller principal payments, which were scheduled to increase. CW Capital in March 2010, sent a note accelerating the loan, according to the complaint, and assured Moinian this was procedural.

Moinian said it reached a deal on a restructuring agreement by June 11, 2010, but shortly before getting the agreement from Moinian, the lenders got an offer to buy the loan from Related, which wanted to demolish the building and redevelop the site as a mixed-use retail and residential tower.

Moinian claims the lenders then refused to sign the restructuring unless the developer signed a deal that the landlord would be able to evict tenants without compensation in the event the landlord was to redevelop the property.

“Such a provision is inappropriate for a newly renovated building and is a non-market term to which no rational tenant would consent,” Meister said in the complaint.

Moinian said he had already reached a deal to lease a full 33,000-square-foot space to HQ Global Workplaces and was in talks with the William Morris 77,000-square-foot lease, spread over three floors of the building.

By September, Bank of America assigned the loan to a Related affiliate called Three Columbus, which immediately assigned the loan to Deutsche Bank unit GACC, the financing partner of Related. Three days later, GACC filed to foreclose on the building.

Moinian said that by Sept. 30 it requested a payoff letter from the lenders, but that letter contained a “bogus” $54 million prepayment penalty that was not in the original loan documents.

SL Green reached a deal on Monday with Moinian to restructure his debt at the property.

Moinian Is Asking The Court for an injunction against the foreclosure action and an order to force the lender to accept his prepayment of the loan balance.

 

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