Anglo Irish Bank and an Israeli investment firm are facing a $40 million lawsuit from developer Shahab Karmely, who alleges breach of contract and conspiracy after the Israeli firm foreclosed on his stake in a stalled Tribeca condominium project.
Karmely, owner of Kar Properties, filed suit in New York State Supreme Court last month against the bank and W-D Group, an Israeli firm led by investors Eitan Wertheimer and Ezra Dagmi. W-D, the mezzanine lender in the proposed 118-rooom hotel and 40-unit condo at 443 Greenwich Street, foreclosed on Karmely’s stake in the project after he failed to pay back a $20 million mezzanine loan.
“Our position is that the mezzanine debt was subordinated to the senior debt and that mezzanine debt could not be repaid by our client until the mortgage was satisfied,” attorney Vincent Syracuse, who represents Karmely, said. “The mortgage had not come due when this thing started.”
In 2006, Karmely bought the former office building at 443 Greenwich for $113 million, with plans to convert the property into a luxury hotel and condo. Court records show he obtained an $85 million loan from Anglo Irish Bank and a $20 million mezzanine loan from W-D Group, pledging shares in the project as collateral.
“Unfortunately, due to the recession and the downturn in the real estate market, Greenwich Partners was unable to develop the property according to its original business plan,” Stephen DiPrima, lawyer for W-D Group, wrote in an October filing in U.S. District Court. “Greenwich Partners was unable to obtain a construction loan to pay off the mezzanine loan and make renovations of the property.
He added that Greenwich Partners has lost $17.4 million as the property sat empty and unrenovated since 2006. W-D claims that over that period of time, it contributed $72 million in loans and equity, while Karmely only contributed $9 million.
Court records show that Karmely did receive financing offers from UBS and Pacific National Bank, but the partners found the terms unacceptable.
W-D called in a default in September 2010, but Karmely filed for an injunction on Oct. 13 to block a planned Oct. 20 auction, arguing that he never defaulted on the loan. Court records show that Karmely failed to pay the mezzanine loan, plus $7.5 million in interest, that came due in October 2009, but Karmely says that the loan documents say the senior loan to Anglo Irish Bank must be paid off before any mezzanine loan is paid off.
A federal district court judge refused to block the October auction, and Karmely in November filed an appeal.
Lawyers for Anglo Irish Bank declined to discuss the specific allegations, but said the case has no merit.
“There are no facts supporting those allegations,” said Troutman Sanders attorney Aurora Cassirer, who represents Anglo Irish Bank in the case.
Lawyers for W-D were not available for comment and nor was Karmely.