Investor seeks to block loan deal at Reade57

By David Jones | June 30, 2011 06:06PM

Germany’s Helaba Bank and Chicago-based lender Capri Capital Partners are facing a $20 million lawsuit from investor Amir Chaluts at the troubled Reade57 condominium project in Tribeca, seeking to stop the lenders from modifying a loan agreement with the John Buck Co., the lead developer on the project. 

Chaluts, operating under the name 281 Broadway Developers at the project, filed suit in Manhattan Supreme Court June 24 seeking an injunction against the lenders for making a loan agreement without his consent and a judgment against the lenders.

“Despite developers having advised Helaba and Capri that any loan modification must be approved by developers, Helaba continues to fund the loan, and… Helaba, Capri and Buck are presently negotiating a modification of the loan agreements,” attorney Aaron Abraham, representing Chaluts, said in the New York state Supreme Court complaint.

Chicago-based real estate investor John A. Buck, chairman and CEO of his eponymous company, and Chaluts entered a deal in 2005 to develop the mixed-use condo project at 281 Broadway between Reade and Chambers streets. The project was slated to cost $94 million and open in August 2007. Under the financing agreements, Helaba agreed to an $84.7 million construction loan and Capri agreed to an $8 million mezzanine loan.

“From the very beginning of the project, Buck, who has been responsible for the management of the construction process, has mismanaged the project, leading to extreme delays and significant increased costs on the project,” Abraham wrote in the complaint.

A Prior Supreme Court suit, filed in 2010, accuses Buck of gross negligence, breaches of fiduciary duty and violations of the partners’ operating agreement. Buck, who developed the Standard Hotel in the Meatpacking District, did not return calls for comment.

Court records show that a contractor hired by Buck in 2006 caused a landmark cast iron building at 287 Broadway to lean eight inches forcing the Department of Buildings to issue a vacate order, and then bring the Reade57developers in for regular updates on the progress of the condo project. The Reade57 project, designed by SLCE Artchitects, was planned to form an L shape around 287 Broadway.  

In 2008, Chaluts rejected a request from Buck for additional funds to help maintain the project, which he says is his right under the operating agreement, according to legal documents obtained by The Real Deal. He said Helaba has been in talks on another modification of the loan agreement since the spring of 2010. The projected budget for the project has since ballooned to $125 million and Chaluts filed suit against Buck in 2010, challenging their authority to make unilateral decisions on the project.

Chaluts alleged in his 2010 suit that Buck refused to let him see the records or be consulted on decisions involving the loan modifications or other issues. Sales were previously scheduled to launch this spring, with units ranging from $814,000 to $2.49 million.  

Helaba and Capri officials were not immediately available for comment. Chaluts did not return calls seeking comment.