JPMorgan cleared to proceed with 90 Broad closing

But Swig will get a chance to marshall evidence to stop sale
By David Jones | November 19, 2013 05:41PM

Developer Kent Swig has lost the first round in a legal offensive to block the sale of 90 Broad Street — a move that he claimed lender JPMorgan Chase undertook without giving him the proper chance to make his own offer.

At an hour-long hearing this morning, New York State Supreme Court Judge Jeffrey Oing shot down Swig’s request to keep a temporary restraining order in place.

The ruling lifts a three-day pause on the sale, allowing JPMorgan to proceed to the closing, scheduled for Dec. 22. However, all is not lost for Swig: Judge Oing scheduled a hearing on Dec. 13 to rule on his request for a preliminary injunction, which would delay the closing.

Judge Oing found that Swig had failed to muster enough documentation, such as a sworn affidavit and a timeline of the deal, to prove he had the right to a “last look” counteroffer.

“The bottom line is I don’t have an affidavit from [Swig],” Judge Oing said. “This is not a mom-and-pop shop.”

JPMorgan, which controls the entity that owns the 393,000-square-foot Lower Manhattan office tower, agreed last month to sell it to Princeton International Properties for about $126 million, following an auction through brokerage Eastdil Secured. Swig purchased the building in 2005, and JPMorgan contributed $4.7 million in mezzanine loans and $86 million through a securitized loan pool, according to court documents.

Last week, Swig sued JPMorgan, alleging the bank violated a provision of a 2006 agreement that allowed him to match any third-party bid for 90 Broad. The bank allegedly failed to disclose the identity of the buyer or the purchase price to Swig, who said he read about the terms of the deal in The Real Deal on Nov. 13.

But JPMorgan told a different story. In 2010, the bank quietly called in a default on Swig after the developer, operating through a LLC, failed to respond to a capital call, which is a request for investors to fund the building operations, according to an affidavit from a JPMorgan executive.

Indeed, Swig had allegedly diverted funds from the property to form a separate real estate investment trust. The lender exercised its right to replace Swig as manager of the LLC, and therefore all major decisions reverted to the bank, the affidavit said.

JPMorgan said it had notified Swig in September 2010 and that later he had acknowledged the change in control.

But Judge Oing questioned whether this amounted to Swig giving up his rights to bid on the building, to which lawyers for JPMorgan replied that Swig had participated in the sale auction and could have come forward earlier.

“We do not comment on pending litigation and we remain ready, willing and able to immediately close on the purchase of 90 Broad Street,” said a spokesperson for Swig’s firm, Swig Equities.

“Obviously we’re disappointed,” attorney Thomas Mullaney, who represents Swig in the case, told The Real Deal, noting they plan to present new evidence at the preliminary injunction hearing.

A spokesperson for JPMorgan declined to comment.