Another legal door closes for jilted investor at 111 West 57th Street

The Connecticut-based firm put up $65M equity for the 1400-foot tower. Four years later it lost it all.

Sep.September 03, 2019 04:47 PM
111 West 57th Street (Credit: iStock)

111 West 57th Street (Credit: iStock)

Yet another attempt by an investor to reclaim its stake in one of Manhattan’s tallest new towers has been thrown out by a federal appeals court judge.

A RICO claim brought by AmBase Corporation against developers and lenders at 111 West 57th was dismissed Tuesday in the United States Court of Appeal for the Second Circuit, court filings show.

The under-construction tower, which will stand 1,428 feet above Midtown, is one of three new ultra-thin, ultra-tall towers set to reshape the skyline south of Central Park. Condominiums in the building start at $18 million and penthouses are asking as much as $60 million.

Since planning began, the project has been marred by infighting between lenders, developers and investors. In 2013, AmBase joined with Michael Stern’s JDS Development Group and Kevin Maloney’s Property Markets Group to purchase the former Steinway Hall and its ground lease for $132 million. AmBase provided $65 million equity – or 50 percent – of the acquisition price.

From left: JDS Development Michael Stern, 111 West 57th Street, and Property Markets Group founder Kevin Maloney (Credit: Getty Images)

From left: JDS Development Michael Stern, 111 West 57th Street, and Property Markets Group founder Kevin Maloney (Credit: Getty Images)

The partners secured a $725 million construction loan from Apollo Global Management and AIG, but amid delays and cost overruns, they ultimately defaulted on loan repayments. As a forbearance agreement expiration approached in March 2017, Apollo sold a $25 million junior mezzanine stake to Spruce Capital Partners, who swiftly foreclosed on the project.

Ever since, AmBase has sought to reclaim its stake in the building, while firms JDS and PMG have been brought back into the project to complete the tower.

AmBase has filed four claims against the project’s sponsors in state and federal courts. In its most recent complaint filed New York State Supreme Court in May, the firm accused JDS, PMG and Spruce of a “corrupt agreement” to wipe the firm’s stake in the project. That complaint is still ongoing.

Another claim against the sponsors filed in the Southern District of New York, that alleged AmBase was misled by the sponsors and that they misrepresented their ability to secure construction financing, was dismissed in October.

Tuesday’s federal appellate decision affirmed part of the October decision, stating that AmBase failed to allege that the defendants acts are a “threat of continued criminal activity.” However, it did leave open the option for AmBase to continue litigating its prior claims made in state courts, which had been dismissed by the Southern District.

Tad O’Connor, an attorney at Kasowitz Benson Torres who is representing the building’s sponsors, said in an email that his clients were “pleased” with the federal judgement. “If Ambase attempts to pursue this matter further in court, our clients expect those meritless efforts to meet the same fate of dismissal,” he wrote.

Ambase could not be reached for comment. An attorney for Ambase did not respond to a request for comment.

These lawsuits have circled the building alongside others. Brokerage Corcoran Sunshine sued the sponsors for $30 million, claiming they self-sabotaged the project and prompted a stall in condominium sales. (Douglas Elliman now is heading sales at the project.)

And in December, The Real Deal reported that two Russian oligarchs — including one with a criminal background — hid a $21 million investment in the building.

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