The Real Deal New York

Eichner in danger of defaulting on Flatiron condo project: lawsuit

Developer is battling JV partners Fortress Investment and Dune Real Estate
By Rich Bockmann | March 28, 2018 03:10PM

Bruce Eichner and 45 East 22nd Street

In the latest chapter of his storied, up-and-down career, Ian Bruce Eichner is once again verging on losing control of his signature development project of the market cycle.

Eichner, who has notoriously gone bust in each of the past three decades but bounces back each time, is now battling with his joint-venture partners Fortress Investment Group and Dune Real Estate Partners over financing at his glassy Flatiron District condominium tower at 45 East 22nd Street.

The head of the Continuum Company is accusing Fortress and Dune of stymying his efforts to refinance the struggling project in an effort to protect their returns, thus edging him toward default and putting him on the hook for personal guarantees, according to a lawsuit Eichner filed in Manhattan Supreme Court Wednesday.

Eichner claims the partners will declare a default under their JV agreement if he can’t secure temporary certificates of occupancy for two units in the 83-unit project by March 31 – effectively cutting him out of the day-to-day operation of the development. But Eichner says they’re actively working to prevent him from obtaining the TCOs, both by refusing to release funds necessary for construction work and blocking the developer from purchasing one unit himself, which he offered to buy for $19.5 million.

“The only explanation for [Fortress and Dune’s] course of action is [their] desire to take over so that [they] can sell of the remaining units at a deep discount sufficient only to recoup [their] own investment plus preferred interest,” Eichner’s attorneys wrote in court papers.

Eichner declined to comment. Representatives for Fortress and Dune could not be immediately reached.

The condo project, like many across the city, is struggling to move units amid a slow sales market. Eichner claims that more than 70 percent of the units are sold, but when the $343 million construction loan Goldman Sachs provided for the project came due last fall, the partners had to seek additional financing to complete construction.

Eichner said he secured a signed term sheet from JPMorgan Chase in late January for a $160 million inventory loan, but the financing left a $20 million shortfall that would be have to be made up by Fortress and Dune’s payoff and a discount on their debt.

The developer said the partners had previously reached a conceptual agreement to these concessions, but claims Fortress and Dune instead rejected the proposal and started delaying the project.

Meanwhile, Eichner claims he was working on a separate deal with Fortress provide financing for the 1 million-square-foot mixed-use development he’s planning in Crown Heights with Lincoln Equities. Eichner said that in order to secure the financing, Fortress strong armed him into moving a $10 million deposit he had set aside as part of the 45 East 22nd Street project into a Fotress-controlled account.

“Eichner, facing untenable pressure on the Crown Heights deal, had no choice but to agree to the terms,” his attorneys wrote.

Now, Eichner says, his JV partners are threatening to abandon the Flatiron project.

Fortress and Dune, his attorneys wrote, have “telegraphed that [they] will proceed to destroy all the remaining equity in the project, destroying the value of the [joint venture] and completely depriving [Eichner] of the value of [his] $61 million investment.”

Eichner is suing for preliminary and permanent injunctive relief, plus no less than $20 million in compensatory damages and $60 million in punitive damages.

It’s the latest twist in the developer’s long and storied career, which saw him surrender his CitySpire tower and and office building at 1540 Broadway in Midtown in the early 1990s, as well as his $3 billion Cosmopolitan Resort Casino Las Vegas casino in 2008.

After his exile to the desert, Eichner returned to New York City in 2010 and the next year started stitching together a complicated assemblage to build the Flatiron project.

In 2016 he lost control of a large development site in East Harlem at 1800 Park Avenue he had purchased in 2013 for $66 million. The Durst Organization bought the property for $90.95 million after it purchased debt on the property that Eichner had defaulted on.