Lead investor in JDS, PMG’s supertall 57th St. tower turns off cash pump

The majority investor in Michael Stern and Kevin Maloney’s planned 1,428-foot luxury condo tower at 111 West 57th Street is no longer willing or able to pump money into the project and is in talks to reduce its stake, public records show.

Ambase Corp., a New York-based real estate investment firm, bought a 59 percent stake in the project for $56 million in June 2013.

Over the past six months, Stern’s JDS Development Group and Maloney’s Property Markets Group requested Ambase to invest an additional $23.8 million in the project through three capital calls, according to Ambase’s quarterly report filed with the Securities and Exchange Commission. But Ambase only coughed up $2.6 million, and the parties are now locking horns over how much to reduce the company’s share in the project by.

The SHoP Architects-designed tower at 111 West 57th Street is slated to be one of New York’s tallest residential buildings. Only Extell Development’s Nordstrom Tower at 217 West 57th Street is slated to rise higher, to more than 1,750 feet.

While JDS and PMG have kicked off construction, they are yet to secure a construction loan. The project is slated for completion in 2016 and is expected to field 60 apartments with prices ranging from $14 million to $100 million. In mid-2013, the partners secured a $230-million acquisition and pre-development loan from Annaly LLC.

“The Company’s [Ambase’s] management and its Board of Directors concluded that, given the continuing development risks of the Joint Venture, and the Company’s financial position, the Company should not at that time increase its already significant concentration and risk exposure,” the report read, referring to 2014.

It’s not clear whether Ambase’s reluctance to up its investment is due to its own financial situation or due to project-related concerns. The company, which Yahoo Finance shows has a market cap of $90.4 million, holds only $3.4 million in cash, according to the report. Ambase’s CEO Richard Bianco did not respond to requests for comment by press time.

It’s also unclear why JDS and PMG asked Ambase for additional funds, as both firms declined to comment.

The parties are currently at odds over how much Ambase’s stake in the project will be reduced for not fully meeting the capital calls, which are a key component of the partnership agreement between developers and their investors. JDS and PMG want to bring Ambase’s stake down to 45 percent, while Ambase wants to retain a higher share, according to the filing.

The dispute centers on the first capital call from December 2014. JDS and PMG requested Ambase to invest an additional $10.3 million, but Ambase only supplied $1.5 million. JDS and PMG appear to have come up with the balance, and argue that Ambase’s share in the project should be diluted as a result. Ambase argues that JDS and PMG’s contribution should be treated as a “member loan”, which wouldn’t dilute Ambase’s shares.

In February of this year, PMG and JDS requested another $7.3 million, of which Ambase supplied only $700,000. And in April 2015, they requested another $6.8 million, but got only $400,000. Ambase doesn’t dispute that these two shortfalls should lead to a dilution of its shares.

The tussle isn’t the first dispute involving the luxury tower. Last spring, JDS and PMG reportedly fell out and will no longer cooperate on projects in the future. The developers have also taken stick from unions and local politicians for their decision to build the project sans union labor.