Town New Development is suing entities tied to New Empire Real Estate Development, claiming Bentley Zhao’s firm stiffed the brokerage out of $210,000 in consulting fees and a $2.2 million termination fee.
The breach-of-contract suit, filed Thursday, is connected to Town’s work on 131 East 47th Street, where New Empire is planning a 122-unit condominium tower. According to court documents, Town is seeking money owed plus $5.45 million in damages.
Town’s 2016 sales exclusive with New Empire stipulated that the developer would pay Town a $10,000 monthly consulting fee, as well as 2.5 percent commission on the sale of each unit, according to court documents. The agreement stipulated that if New Empire terminated Town, it would pay a 0.75 percent termination fee — or $2.18 million based on the projected $290.8 million sellout.
According to Town, the developer has refused to pay the termination fee, and owes it $210,000 for consulting work.
Court documents allege the developer transferred the property from one limited liability company (Lex 47th Development LLC) to another (K-Land Lex 47th LLC), rendering the first entity — with which Town had an agreement — insolvent.
The property transfer “took place at a time when Defendant Lex 47 had incurred obligations or knew it would incur obligations beyond its ability to repay,” court documents state. “The conveyance left Lex 47 with unreasonably small capital to continue in the business in which it was engaged.”
A representative for New Empire declined to comment until its counsel is able to review the matter.
Sunset Park-based New Empire is a prolific developer throughout the city, with projects on the Lower East Side, Midtown West and several in Brooklyn.
The firm paid $81 million for the site at 131-141 East 47th Street in 2015, and demolished four existing buildings to make way for the planned 49-story tower. A year later, New Empire filed plans to build a 151,000-square-foot tower with 122 units — slightly less than the 138 originally planned.
Town New Development is a vestige of Town Residential, the eight-year-old residential firm, which shut its sales and leasing operation in April. Founder and CEO Andrew Heiberger has said the traditional brokerage model is unsustainable in an era of high commission payouts and heightened competition.
Town’s lawsuit is one of several recently filed by brokers accusing developers of stiffing them on commissions or breaching exclusive sales agreements. In June, Corcoran Sunshine Marketing Group filed a $30 million suit against JDS Development Group and Property Markets Group, alleging they sabotaged the sales effort at 111 West 57th Street.