Fight is on for “leaning” Seaport tower after mediation falls apart

Fortis Property Group, Bank Leumi “too far apart” in talks over foreclosure dispute at 161 Maiden Lane

Seaport Residences (Google Maps)
Seaport Residences (Google Maps)

Nearly all prospective buyers have backed away from a troubled development site near the South Street Seaport, where a still-unfinished condo tower leans slightly to the north.

But that’s just one of the problems facing 161 Maiden Lane, whose future is uncertain as the developer and its lender fight over who is to blame for the project’s cash flow problems.

Bank Leumi is seeking to foreclose on a $120 million loan on Seaport Residences (formerly known as One Seaport), a planned 60-story condo tower that has long been plagued by construction delays and litigation over, among other things, the building’s tilt: three inches to the north. Developer Fortis Property Group and the bank agreed to enter mediation this past summer, but those talks fell apart because the “parties were too far apart in discussions to reach any resolution,” an attorney for Bank Leumi told a judge during a recent hearing.

That means the case, consolidated with Fortis’ lawsuit against the bank, is heading to trial.

If the case gets to that point — the court could still take action or the parties could reach a deal in the meantime — the trial would be the culmination of years of issues at the site, including delays, contractor disputes and the death of a worker. Concrete subcontractor SSC High Rise pleaded guilty to manslaughter in July 2018 in relation to the death of 36-year-old Juan Chonillo, who fell 29 stories while working on the project. He was wearing a safety harness, but it was not harnessed to anything.

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Work was further complicated by dueling lawsuits between Fortis and its construction manager Pizzarotti, who blamed each other for the tower’s slight lean to the north. Fortis replaced the contractor with Ray Builders, whose workers walked off the site in July because they weren’t being paid. According to court documents, all but six sales contracts have been rescinded for the project’s 99 units.

Fortis alleges in its own lawsuit against Bank Leumi that the lender wrongfully stopped funding the project after promising flexibility in deadlines and getting the developer to throw in another $20 million in equity.

The bank, which wanted to sell the property, possibly as more than one parcel, claims Fortis defaulted on its loan agreement by failing to obtain a temporary certificate of occupancy for a single condo unit in the tower by May 31, 2020.

Last month, state Supreme Court Judge Barry Ostrager rejected the bank’s motion seeking summary judgment on the foreclosure action. An attorney for the bank did not return a request seeking comment. A representative for Fortis sent a statement characterizing the rejected motion as a “major victory” for the developer.

“The Court’s decision raises serious doubt as to the prospect of Bank Leumi foreclosing on the property,” Fortis said in a statement. “Upon denying Bank Leumi’s motion, the Court urged the parties to continue settlement discussions, and Fortis stands ready to work toward this end.”