Harry Macklowe is trying to stop a disgruntled lender from cashing in on his stake in two real estate investment trusts, a move that would trigger “hundreds of millions” in capital gains taxes, a new lawsuit alleges.
Two entities tied to the octogenarian developer are suing Israel Discount Bank of New York to stop the redemption of about $20 million worth of Operating Partnership units “before irreparable and irreversible damage is inflicted.”
Macklowe pledged the units as collateral for $89.5 million in loans from the bank, which are now in default, according to a complaint filed this week in state Supreme Court.
The disposition of the collateral would be “so draconian and financially devastating — beyond the mere value of the collateral itself — that equity cannot permit it,” the suit alleges.
A lawyer for the bank declined to comment.
Macklowe acquired the units after the “billion dollar” sale of a large office building “years before” to defer capital gains taxes, the suit says. It’s unclear what sale the lawsuit is referring to or what the loan was for. A lawyer for Macklowe did not immediately respond to a request for comment.
The bank alleged that Macklowe first defaulted on the loan in March 2023. The parties entered into a forbearance period through December 2023 that was later extended by a year.
Macklowe was attempting to repay some of the debt by selling his East Hampton estate. But the sale has been hampered by unpaid fines and legal issues stemming from work Macklowe did at the property, according to an October letter from one of Macklowe’s attorneys.
Macklowe still expected to repay the loan by the end of December, according to the letter. But the deadline passed and the debt was not settled, so the bank threatened to redeem the collateral unless the debt was repaid by Jan. 13.
The lawsuit calls the threat “rash and disastrous” and accuses the bank of “pursuing this course out of vindictiveness rather than in a good faith effort to achieve the greatest return.” If the sale goes ahead, it alleges, Macklowe “may never recover from the financial consequences.”
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