Dekabank Sues Blackstone for Seattle Building Water Damage

A Blackstone-owned Seattle office tower could be underwater — literally.

Frankfurt-based Dekabank alleges in a lawsuit that Blackstone Property Partners’ fund failed to repair and maintain the 23-story Exchange Building in Downtown Seattle, allowing “persistent water intrusions” through the property windows, requiring a full repair of the building facade.

Dekabank, the lender on the property, alleges Blackstone’s inaction has been “disastrous” and led to at least $17 million in repairs.

The German lender further alleges Blackstone was more concerned with the bottom line than the state of the property. Blackstone put off maintenance that would have prevented the water damage, according to the lawsuit.

Dekabank filed the lawsuit in New York Supreme Court on January 21. Blackstone strongly denies the allegation in a statement.

“Dekabank’s claims are without merit,” said a spokesperson for Blackstone. “We have been responsibly managing this asset since our acquisition in 2017 and are disappointed with the path Dekabank has chosen to take. We will respond in the ordinary course as part of the legal process.”

Dekabank provided an initial $97.1 million loan to Blackstone for the office tower in Downtown Seattle in 2017. Blackstone hired its affiliate Equity Office Management as the property manager.

In 2022, Blackstone refinanced the tower again with Dekabank. As part of the refinancing, Blackstone allegedly entered into a carry guarantee, which ensured it would cover operating expenses associated with the project, the lender claims.

According to the lawsuit, Blackstone would have to satisfy 18 different conditions in order for the carry guarantee to expire, including a certification showing it paid all operating expenses.

Dekabank alleges Blackstone failed to satisfy two of the requirements and the carry guarantee remained in place.

As it sought to assess whether Blackstone satisfied the conditions of the carry guarantee, Dekabank claims it performed extensive due diligence on the property. During this time period, the loan matured, according to Dekabank’s lawsuit.

The lender hired a consultant to perform a wide-ranging evaluation of the property site, structure, facade and windows.

Dekabank called the consultant’s results “shocking.” The property allegedly suffered substantial damage to its facade. The building required $17.2 million in short-term repairs with an additional $13.1 million required in reserves, according to Dekabank.

Portions of the façade were exhibiting “deficiencies and evidence of deferred maintenance,” according to Dekabank.

Water was allegedly able to infiltrate the property in several locations. The chief engineer of the property even revealed that he was aware of active leaks on the fourth, fifth, 16th, 18th and 21st floors, according to the lawsuit.

The property manager also confirmed there had been water leakage issues through the windows and walls of the property since at least 2018, the lawsuit alleges.

“Borrower undertook little more than band-aid repairs, which were insufficient to stem the tide of water pouring into the property and causing widespread damage,” Dekabank said in its lawsuit.