Ian Bruce Eichner missed a sales milestone to put $500 million worth of units under contract last fall at his troubled Flatiron District condominium building, his partners claim.
And the threat of not hitting the mark when his six-month extension came up late last month is why he asked the court to step in and save his skin, according to his partners.
“[Eichner] is over $110 million shy of the $500 million milestone, an amount representing a shortfall of over 20 percent,” a representative for Fortress Investment Group, which is a partner on 45 East 22nd Street with Dune Real Estate Partners, wrote in court papers filed Wednesday.
Eichner last week filed a lawsuit in New York State Supreme Court, accusing Fortress and Dune of deliberately stymying his efforts to avoid a default under their joint-venture agreement on the 83-unit, $700 million project.
The head of the Continuum Company claims that his partners, frustrated by the slow pace of sales, want to slash prices on condos and unload units in a fire sale. Eichner only gets paid once Fortress and Dune get their $85 million investment back plus their preferred return at an annual interest rate of 22 percent. The Continuum chief alleges his $61 million equity stake will be wiped out.
But Fortress and Dune argue in court papers that, as per the terms of their joint-venture agreement, Eichner is required to settle the matter in arbitration – and only after a default is declared.
A copy of the JV agreement attached the lawsuit shows the partners originally agreed that Eichner would have 36 months from the launch of sales to put $500 million worth of units under contract to a bona-fide third party, a common requirement for development projects. When he missed the deadline in late September, his partners agreed to give him an extra six months until March 31.
An attorney for Eichner declined to comment, and representatives for Fortress and Dune could not be reached.
The Real Deal recently conducted an analysis showing that, on average, it took luxury developers roughly 14 months to hit the $500 million mark.
What’s more, Eichner said he tried to infuse more cash into the project by buying an apartment in the building for himself for $19.5 million. But Fortress and Dune claim their development partner is looking for a closing credit and an outsized work letter that would bring the actual revenue closer to $17.4 million – and that the closing wouldn’t make the March 31 deadline.
They say he violated the JV agreement by getting the building contractor to alter the layout of the four-bedroom condo to create a 4,000-square-foot one-bedroom apartment for himself.