Madison Equities, a developer of luxury residential projects in the city, is suing the Serbian Orthodox Cathedral of St. Sava for allegedly breaching a letter of intent between the two parties and acting in a “deceitful and unconscionable” way by not disclosing a $13.5 million broker fee.
Madison is looking to tap into unused air rights at the site of the landmarked church at 13 West 25th Street, as well as those belonging to the property adjacent to the church — just under 200,000 square feet of air rights in total — to construct a commercial building. The developer promised to help pay for much-needed restorations and improvements on the sanctuary, in exchange for the church’s air rights, according to a lawsuit filed in New York Supreme Court late last week. The two parties signed a letter of intent in May 2014, and planned to enter into more formal negotiations.
But the church, allegedly unbeknownst to Madison, hired commercial brokerage Tenantwise to negotiate on its behalf, Madison claims in its suit.
While Madison — which is led by Robert Gladstone — agreed to enter into negotiations about the air rights and paid $250,000 in advance to the church, the developer didn’t know about the existing liability between the church and Tenantwise, according to court papers. Madison paid the money to the church up front to “help” with matters such as counsel fees, because the church seemed to be in need of the funds, the developer’s lawyer Larry Hutcher told TRD in a brief phone interview on Monday.
The church only disclosed Tenantwise’s involvement after it signed a letter of intent with Madison, and also asked the developer to foot the bill for TenantWise’s services, which they said was $13.5 million. “Upon further information and belief, the Executive Board of the Church embarked upon a scheme to escape the consequences of their mismanagement (and potential breach of their fiduciary duties to Church members) by shifting the liability to Tenantwise to Madison,” the suit states.
In the suit, Madison claims that Tenantwise’s fee “exceeds market value by a multiple of six.” Such a fee, the suit continues, renders the proposed transaction between Madison and the church “unfinanceable.”
The hefty fee is a deal breaker for Madison, Hutcher said. “It’s not the Christian way.”
A representative from the Serbian church couldn’t be reached by press time. A Tenantwise representative declined to comment when reached by phone.
Madison is suing to get its $250,000 payment back as well as damages incurred because of the suit, according to Hutcher.
Madison already developed 57 Irving Place, 10 Sullivan Street and a residential conversion at 212 Fifth Avenue, among other properties. The firm, which was founded in the 1960s, opened a Marriott hotel on the Upper East Side in 2006. In 2012, Madison faced a foreclosure lawsuit at the Chelsea Modern, one of its residential properties, after allegedly defaulting on a $12.1 million loan to refinance the luxury condominium.