Terror victim asks US government to seize 650 Fifth Ave.

Tower has been subject of decade-long fight between Iranian nonprofit and feds

TRD New York /
Feb.February 09, 2017 05:35 PM

A complaint filed in a New York federal court on Thursday requests that the federal government seize 650 Fifth Avenue from the Alavi Foundation, a nonprofit alleged to have deep ties to the government of Iran.

It’s just the latest skirmish in a decade-long, high-stakes legal war that’s pit the U.S. government against the cultural foundation for control of the 36-story office tower, estimated by some to be worth $1 billion. A related case might be heard by the U.S. Supreme Court.

In the complaint filed in U.S. District Court on Thursday, plaintiffs Jeremy Levin — who in 1984 was kidnapped by Hezbollah, a Lebanese Shiite militia group that’s backed by Iran — and his wife Lucille say they’re owed $34.4 million from a 2008 judgment related to state-sanctioned terrorism. They argue the money should come from the federal government seizing Alavi’s assets, selling them off and distributing the proceeds to victims of terror.

Levin, who escaped after nearly a year in captivity, received a writ of execution against the defendants’ assets, including the 36-story office tower, in January. Suzelle Smith, the Levins’ lawyer, could not immediately be reached for comment.

Alavi owns 60 percent of 650 Fifth Avenue, and the U.S. government holds a 40 percent stake in the building after previously seizing it from the Assa Corporation, an entity linked to Iran’s national bank.

The Levin case has for years slowly snaked its way through appeals courts, along with a number of other lawsuits that seek to seize Iranian assets in the U.S. to satisfy damages from state-sponsored terror attacks. Tomorrow, plaintiffs in a related case, Kirschenbaum v. Alavi Foundation, have a deadline to respond to Alavi petition to the U.S. Supreme Court.If The Supreme Court hears the case and rules in its favor, Alavi could effectively shut the door on the federal government’s attempts to fully seize the office tower, which was nearly successful a few years ago.

Following a 2013 ruling in U.S. District court that favored the federal government — and one that consolidated Kirschenbaum’s and Levin’s cases — Alavi’s U.S. properties were placed under the control of a court-appointed monitor, a former federal judge.

Before Alavi effectively lost control of the building, it entered into a deal for a joint venture between SL Green Realty and Jeff Sutton’s Wharton Properties to acquire a 49-year leasehold for the retail portion of the tower, as The Real Deal previously reported. The deal was in process when the building was seized, and closed shortly thereafter when all parties — the U.S. government, Alavi and the former federal judge who had been appointed to oversee Alavi’s stake — agreed to the terms. Several real estate professionals consulted the judge, sources told TRD.

In July 2016, the Second Circuit of Appeals overturned the U.S. District Court’s decision, and found that the government prosecutor had presented insufficient evidence that Alavi knowingly partnered with a sanctioned entity — Iran. Following the surprising decision from the Second Circuit Court of Appeals, most of Alavi’s U.S. properties were returned, with the exception of 650 Fifth Avenue. Because Assa’s 40 percent interest in 650 Fifth Avenue has been forfeited to the federal government, the building is still overseen by the court appointed monitor. Alavi remains the majority owner, but the forfeited portion controlled by the government is at risk of being sold.

Beyond that, Alavi’s status as “agencies or instrumentalities” of Iran under the Terrorism Risk Insurance Act (TRIA) is, “not foreclosed as a matter of law,” according to the Second Circuit’s opinion penned by Judge Richard Wesley. It is this part of The Ruling Alavi Hopes The Supreme Court will overturn, and the aspect of the ruling that could prevent other claimants from using the courts to get at Alavi’s building.

In November, SL Green and Sutton signed Nike to one of the most valuable retail leases in city history. Sources told TRD the lease is worth about $700 million over the course of the deal.

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