Judge: Dispute Over Unfinished Seaport Condo Tower Caused 'Exponential Devaluation'
Fortis Property Group has been told to return to mediation with its lender over its stalled condo tower in Manhattan's Seaport district, which has been beset by construction issues and legal disputes.
Fortis and Valley National Bank — which absorbed the project's original lender, Bank Leumi USA, last year — have until Friday to commit to mediation and until Dec. 6 to reach an agreement, per an order issued by New York State Supreme Court Judge Barry Ostrager on Tuesday. The Real Deal first reported the judge's order.
Valley has been seeking to foreclose on Fortis at 161 Maiden Lane, an unfinished 60-story condo project dubbed Seaport Residences. Ostrager is overseeing the case and implored the parties to find a resolution before the tower's value drops further.
“The result of the parties’ unwillingness to conclude a commercially reasonable settlement has been an exponential devaluation of the collateral during a multi-year period,” the judge wrote.
The two parties have submitted more than 1,400 docket entries over the project over the past three years of lawsuits, the judge wrote, accomplishing “little other than to keep their counsel and the Court busy with discovery disputes, motion practice and appeals.”
Fortis is open to mediation, a spokesperson for the developer said in a statement provided to Bisnow.
"Our top priority is to work with all parties to reach an agreement and to complete this project so that future residents can enjoy one of the most beautiful properties in New York City," Fortis' statement reads. "We thank Justice Ostrager and look forward to working with the mediator."
Valley National Bank didn't respond immediately to Bisnow’s request for comment.
The project, formerly known as One Seaport, has been embroiled in disputes and controversy almost since it began construction, with a worker death in 2017 led to a months-long shutdown of the construction site, The Real Deal reported. One year later, construction came to an indefinite pause after it was noticed that the tower was leaning 3 inches to the north, for which Fortis was sued by its contractor.
The pause was enough to cause turmoil between the developer and its lender. Bank Leumi sued Fortis to foreclose on a $120M loan, and Fortis countersued, claiming that the bank had broken its agreement with the developer by failing to provide deadline flexibility and that the bank had pushed Fortis to add another $20M in equity to the deal. Fortis believes it needs a further $45M to complete construction.
The two parties entered into mediation talks during the summer of 2021, but those talks quickly fell apart.
If Fortis and Valley fail to reach a deal by this year, the project could face further devaluation. Ostrager plans to retire in December, and estimates that more delays to litigation would occur as a new judge gets familiar with the case.
The lender and developer should also create a fund for mechanic’s lienholders within mediation, which the parties had shown “callous disregard” for when pausing construction, the judge wrote in the order.
