An equity investor in the supertall condo development at 111 West 57th Street
The investor, Ambase Corporation, has a contentious relationship with the developers, Michael Stern’s JDS Development Group and Kevin Maloney’s Property Markets Group, and acknowledged it has no access to communications between the developers and its lenders.
“The Sponsors have claimed that additional borrowings of $60 million to $100 million may be needed to complete the project,” Ambase said in its June 29 filing, referencing JDS and PMG. “In addition, Apollo (the mezzanine lender) has indicated that due to projected budget increases, it believes the current loan has been “out of balance”; and thus 111 West 57th Partners or its subsidiaries would need additional funding in order to complete the project.”
“(Ambase) has considered approving the additional financing, but has informed the Sponsors that it has concerns about the Proposed Budget and the implications of the Proposed Budget, as well as other questions that must be addressed first,” the filing reads.
A source close to the developers, speaking on the condition of anonymity, acknowledged that the tower’s projected cost recently increased but claimed there is no budget shortfall because JDS and PMG agreed to pump in more equity. JDS and PMG declined to comment. The SHoP-designed project is under construction and at 1,418 feet, will be New York’s tallest residential building by roof height once completed (at least until Gary Barnett’s Central Park Tower tops out). It will include 60 condos and has a projected sellout of $1.45 billion.
Ambase sued the developers last year, alleging that they tried to dilute its stake in project through unnecessary capital calls. The suit provided a rare glimpse into the ownership structure of a luxury residential project. In January JDS and PMG countersued, alleging that Ambase is withholding “consent to necessary project refinancing” unless they “agreed to pay defendants a sum of money to which defendants were not contractually entitled.”
As The Real Deal first reported in 2015, Ambase, a small real estate investment trust, paid $56 million for a 59-percent stake in the project in 2013 but failed to meet subsequent capital calls and saw its stake shrink as a result.
In 2015 the developers secured a $400 million construction loan from AIG and a $325 million mezzanine loan from Apollo Global Management.
In early 2016 Maloney said the developers will delay sales, citing a weak market. “If the market were red-hot, people would be buying off plans, throwing checks down, and it’d be great,” he told Bloomberg. “But if you have a market where you think marketing would be ineffective for now, why would you launch and spend the money? Wait.” Sales will officially launch in the fall, according to sources.
(To view more of Apollo Global Management’s financing transactions, click here)