The clock is ticking at the former Clock Tower Building in Tribeca.
The Peebles Corp. and Elad Group are battling each other at their planned condo conversion of the landmarked former court building at 346 Broadway, and the cracks between the developers could have them lose the project altogether.
In recent months the two developers have been battling each other in court, accusing one another of undermining the other’s efforts, court documents show.
Elad claims Peebles “never intended to redevelop the property” and is being unreasonable by refusing to sign off on the condo offering plan, which would get the project far enough along to avoid the possibility that the city reclaims the property. Peebles, on the other hand, claims Elad sandbagged his option to exit the property, and said that “if anything is unreasonable, I submit that it is Elad’s demand that” he sign a questionable offering plan “under penalty of perjury.”
Peebles declined to comment on the matter, and representatives for Elad did not respond to multiple requests.
Don Peebles and Elad’s Isaac Tshuva teamed up in 2013 to form a joint venture and buy the 400,000-square-foot property from the Bloomberg administration for $160 million. At the time, it was the most expensive property the city ever sold to a minority developer. Peebles is the minority owner with a 35 percent stake and Elad owns 65 percent, according to court documents.
They made plans to convert the building into 151 luxury condos, and as of early 2016 were close to landing $411 million in construction financing.
But the project has dragged along amid setbacks, including one the developers suffered early last year when a judge ruled that they couldn’t electrify the clock that sits atop the building, which essentially killed their plans to convert the upper part into a condo.
After that, Peebles explored making an exit. Last year he notified Elad that he planned to exercise a “put option” that the two agreed upon in early 2016 that required Elad to buy Peebles out of the project.
Peebles hired an appraiser who valued the property at $491.9 million, but Elad’s appraiser came in with a value roughly 40 percent lower: $310 million. In court papers Peebles claims there was a system set up to reconcile the two sides in case this situation happened, but he said Elad intentionally dragged the process out until it became too late for the partner to exercise the option.
As a result, Peebles claims he “lost the right and ability to sell its interest in the company to [Elad] for approximately $104 million, and has lost the right to treat the proceeds of that sale in a tax-efficient manner.” Peebles filed a lawsuit in January seeking damages of no less than $125 million.
Elad fought back with a lawsuit in March, claiming Peebles never intended to develop the project and is trying to strong arm negotiations by refusing to sign off on the condo offering plan and lock down the construction financing.
Peebles filed a countersuit, claiming that Tshuva, an Israeli billionaire, refuses to list himself as a principal on the offering plan and instead wants his daughter, Elad president Orly Daniell, to be listed. Peebles claims he’ll be guilty of perjury if he certifies the false document.
And time is of the essence. The developers said their lenders require them to sell at least 35 units by August 2 2018, and the deed allows the city to take the property back if they haven’t completed the project within five years of the sale.
The project has been a bit of a legal headache for Peebles. In 2015, former Peebles Corp. executive Daniel Newhouse filed a lawsuit, claiming Peebles reneged on a promise to compensate him with an ownership stake in properties including 346 Broadway.
A judge sided with Peebles and Newhouse withdrew his appeal later that year.
And in September 2015, Dan Hoeg sued Peebles, claiming the developer backed out of an oral agreement to bring him on as an equity partner.
An appeals court Wednesday ruled that Hoeg could only produce documentation showing that he was a consultant, and dismissed his case against Peebles.
In regards to the Hoeg case, Peebles told The Real Deal that his company “values our reputation and honors our contracts” and will “fight to protect our reputation and enforce our contracts.”