A year ago, as the pandemic brought New York City to a standstill, the Chen Foundation was searching for $82 million to complete its Garment District condominium.
The foundation — a family-run developer affiliated with renowned Taiwan-born painter Dr. Tsing-Fang Chen — says it paid $75,000 to have Tribeca Realty Capital do due diligence and secure a loan for its project at 355 West 35th Street.
The loan never came to fruition, and now the foundation is suing Tribeca to recover its fee and damages to the tune of $8.7 million.
In a complaint filed in New York Supreme Court last week, the Chen Foundation alleges that the firm breached their contract, misrepresented its access to credit and caused the foundation a “sizable monetary loss.”
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The foundation began converting the 12-story office building on West 35th into residential condos after acquiring the property for $50 million in 2016. Dubbed the Society House, the project consists of 66 residential units and one commercial unit to house the artist’s nonprofit gallery, T.F. Chen Cultural Center.
The condos were expected to sell for a total of $91 million, according to the project’s most recent offering plan.
In 2017 the developer secured $52 million in financing from Shanghai Commercial Bank. When the foundation went looking for fresh financing early last year it engaged Tribeca Realty Capital, which bills itself as the New York City partner of a $27.5 billion asset management firm that underwrites bridge, mezzanine and equity investments.
The foundation alleges it chose Tribeca Realty partner Stephen Drew after he identified the source of its capital as a South Korean company ready to fund loans “anytime.” A second partner at Tribeca, Ted Kim, the lender’s general counsel, also reassured the foundation, according to its lawsuit.
The term sheet between Chen and Tribeca filed in court records indicates that the Tribeca expected two of its investment partners to syndicate the $82 million loan. But 45 days later the contract expired without the loan closing and the Chen Foundation began to demand the return of its deposit.
Tribeca Realty Capital did not immediately respond to request for comment. In correspondence filed with the court, Drew attributed the delay to the pandemic but also noted that the term sheet gave Tribeca Realty ‘sold and absolute discretion’ for closing the loan and conducting due diligence.
“We have acted in good faith all along, and the Covid-19 and the virtual shutdown of New York City contributed to the delay,” wrote Drew in an October email. “Our team is ready and willing to close on this loan as soon as the capital markets reopen in NYC.”
The Chen Foundation was also told the process was delayed because of difficulty traveling into the U.S., according to attorney Sylvia Tsai, who is representing the foundation in the suit.
“Supposedly the principals were coming in from South Korea,” said Tsai. “[They] were allegedly unable to come to [conduct] due diligence.”
In November, Shanghai Commercial Bank refinanced the Chen Foundation’s condo and added $8.58 million to bring the financing package to a total of $60.58 million.