Investors in the long-stalled redevelopment of the former PS 64 in the East Village are trying to force the building’s sale, claiming their partner is bleeding them dry to line his own pockets with management fees worth $30,000 per month.
A trio of financial backers led by Los Angeles-based Onyx Asset Management is asking a judge to boot developer Gregg Singer as manager of project, alleging several conflicts of interest that have led to him “wasting and dissipating the assets” of the partnership, according to a lawsuit filed in Manhattan Supreme Court Wednesday.
Singer bought the 152,000 square-foot former public school at 350 East 10th Street from the city in 1998, but a deed restriction on the property prevented him from converting it into residential housing. He eventually hammered out a deal with the city to convert the building into a $40-million college dorm for Cooper Union and the West Village’s Joffrey Ballet School, but not before defaulting on his first mortgage in 2009, according to the suit.
It was at that point, the filings claim, that Onyx pumped some much-needed capital into the project, with the understanding that if the property were not redeveloped and producing cash flow within two to three years, the partners would put it up for sale.
The asset manager said it and the other investors put almost $8 million worth of debt and equity into the project, and after paying off the defaulted mortgage the development partnership took out a $22 million bridge loan at 11 percent interest, guaranteed by Onyx.
Despite earlier reports that Singer had signed the West Village’s Ballet School as a tenant, however, progress at the site struggled, and in July the company defaulted on the loan, kicking the interest rate up to 16 percent.
Earlier this year, long-simmering political opposition to Singer’s plan resurfaced, and in August the Department of Buildings issued a stop-work order at the project. The reason for the stop-work order, according to the lawsuit, was because Singer had not signed a tenant for the building.
But due to the precarious financial situation, Onyx says, the partners were unable to secure $89 million in construction financing needed to finish the project. The investors have been urging Singer to sell the property – which was last appraised at $78 million – but claim he has several conflicts of interest that incentivize him to hold on.
Singer has been collecting $30,000 per month in management fees that he’s reluctant to give up, the suit claims. He’s also resisted a broker to shop the property so that he can collect the commission for himself, according to the investors’ complaint.
Onyx and the partners are suing to have Singer removed as manager, as well as for damages tallying more than $500,000.