Billionaires' Row Supertall Project In Foreclosure Amid Developer Dispute
The future of what is supposed to become the tallest residential for-sale building in the Western Hemisphere is in foreclosure and very much in jeopardy.
Steinway Tower at 111 West 57th St. on Billionaires' Row fell into foreclosure in late August when Spruce Capital Partners initiated such proceedings after a $25M loan it held against the property defaulted in June, The Real Deal reports.
Michael Stern's JDS Development and Kevin Maloney's Property Markets Group entered into a joint venture to build a condo tower over 1,400 feet tall and brought in Richard Bianco's Ambase Corp. as a majority investor in 2013, despite Ambase having little background in real estate. But Ambase had cash on hand, thanks to a nine-figure settlement it won against the U.S. government after a 20-year legal proceeding, and needed to put that money to work, according to TRD.
JDS and PMG spent years taking out loans to finance the project — a $400M construction loan from AIG Global Real Estate and a $325M mezzanine loan from Apollo Global Management being the biggest pieces — but complications in construction led to cost overruns, and Maloney and Stern put out five separate calls for more capital. Bianco met three of the calls with his own money, according to TRD, and Maloney and Stern made up the difference for the other two, in such a way as to increase their ownership stake in the tower at the expense of Bianco's.
Bianco has since filed a lawsuit against Maloney and Stern over the move, claiming that the cost overruns were fabricated with the motive of diluting Ambase's shares. Meanwhile, Apollo sold $25M of the Steinway Tower's mezzanine debt to Spruce, with a foreclosure protocol that allowed the firm to take full control of the project without an auction. Armed with a clause in that agreement that allowed Spruce to name JDS and PMG as developers following foreclosure, TRD reports, Bianco filed a separate suit, this time including Spruce, again alleging foul play in an attempt to cut him out of the project.
Maloney and Stern claim that Bianco's legal actions and unwillingness to put up more money to fund 111 West 57th St. are maliciously blocking the project from happening in an attempt to cash out, pointing to an option in Ambase's joint venture agreement to be paid for its shares once construction costs rise past a certain point. Bianco seeks to exercise that option, filing in court that he is owed $136M under what he calls the equity put right, more than double Ambase's initial investment, according to TRD.
Ambase's suit attempting to reverse the foreclosure that would transfer 111 West 57th to Spruce has left ownership an open question as the tower already stands over 500 feet tall, while its suit against JDS and PMG for diluting shares does the same thing.
