Wells Fargo sues to foreclose on 250 Bowery
Wells Fargo has filed suit to foreclose on 250 Bowery, alleging that developer and architect Peter Moore Associates defaulted on more than $40 million in loans for its 63-unit green hotel project.
Peter Moore Associates originally acquired the site in 2006 for $6.5 million, and planned to create a luxury boutique hotel and condominium with geothermal heating, recyclable construction materials and a green roof.
In March 2007, the developer entered a $27.8 million construction loan agreement with Irving, Tex.-based NRFC WA Holdings, a fund led by NorthStar Realty Finance of New York. The lender advanced $9.1 million that month, with the entire loan due Oct. 1, 2008.
Peter Moore’s attorney Raymond Bragar told The Real Deal that the lender is trying to foreclose on the property due to its own liquidity problems related to the credit crisis. The loan was part of a collateralized debt obligation managed by Wells Fargo.
“The market collapsed, therefore the lender’s source of funds dried up,” Bragar said. “If they had extended the notes, we would have been fine.”
The suit alleges that Peter Moore Associates failed to repay the $9.1 million and also failed to ask for an extension, leaving a balance of $9.4 million including interest and late fees. Wells Fargo asked that the court appoint a receiver to oversee the project.
Wells Fargo filed a separate lawsuit Feb. 11 alleging that the developer defaulted on a $12.2 million loan for 250 Bowery between Houston and Prince streets. Interest and late fees since the default raise the amount owed to $12.7 million, according to the suit. As part of that suit, the bank alleges that Moore defaulted on an $8.7 million personal guarantee.
Late last week, Wells Fargo filed a third suit alleging a $2.5 million default on personal guarantees made by a combination of 12 additional investors and private real estate firms, including Manhattan-based Schindler Real Estate and Atlanta-based Dan McDougal Property Holdings.
However, in an affidavit filed on behalf of the developer, project manager Douglas Bemar alleges that North Star Realty Financing, the parent company of NRFC, declined to extend the loan unless the developer paid $6 million to make up for a deficiency in the loan balance.
“NRF II’s claimed deficiency was made in bad faith and solely for the purpose of giving NRF II an excuse not to extend the original maturity date because NRF and/or plaintiff lacked the funding to honor its commitments with respect to the construction note and mortgage because of other commitments it preferred to fulfill,” Bemar alleged in the filing.
The suit followed several months of construction delays and delinquent bills, according to court records. The project was originally slated to open this year, but only a foundation has been finished, Moore’s attorney Bragar said.
In July 2008, Diversified Industries filed suit against 250 Bowery, alleging the contractor billed the developer for $135,000 to pour the foundation and complete related construction work, but was only paid $12,000. Court records show that other contractors have filed mechanic’s liens against the project as well.
Bragar has asked the court to consolidate the suits into one case. A court hearing is scheduled for April 10.