Chetrit walks away from $35 million deposit (and more)

David Goldsmith

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SL Green’s $815 Million Deal to Sell New York City Office Tower Falls Apart
Deutsche Bank was financing deal but pulled out amid market turmoil

Real-estate giant SL Green Realty Corp.’s agreement to sell the former New York Daily News headquarters for $815 million has collapsed after the buyer’s financing pulled out, according to people familiar with the matter.

New York property investor Jacob Chetrit signed a contract in the fall to buy the 37-story building on East 42nd Street, which was the newspaper’s headquarters for many years and was even featured in a Superman movie as the headquarters of the fictional Daily Planet.

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Aby Rosen ditches $600M in building buys
The RFR Realty chief is calling off deals for 900 Third Avenue, 1600 Broadway

Aby Rosen is walking away from more than $600 million worth of real estate deals.

The RFR Realty chief has abandoned a deal to buy 900 Third Avenue in Midtown from Paramount Group for $400 million and a retail condo at 1600 Broadway in Times Square that was on the market for more than $200 million, according to Business Insider. Rosen may look to complete his 900 Third Avenue purchase once the pandemic ends.

Rosen’s decisions reflect the uncertainty in the New York City investment sales market as the coronavirus pandemic shakes the national and local economy. He’s also not the first developer to walk away from a major deal.

Joseph Chetrit, for instance, canceled his deal to buy the former Daily News building at 220 East 42nd Street in Midtown from SL Green for $815 million in March after his main lender, Deutsche Bank, pulled out.

Rosen’s RFR controls many prominent office towers in Midtown, including the Seagram Building and the Chrysler Building. Rosen has not yet revealed many details about his plan for the Chrysler Building, but the skyscraper’s arcade space, which used to be filled with mom-and-pop stores, now sits largely empty

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Anbang’s $5.8B hotel portfolio sale scrapped
Buyer Mirae Asset Global Investments accused the insurer of breach of contract

Anbang Insurance Group’s sale of its U.S. hotel portfolio has fallen apart.
The buyer, South Korea’s Mirae Asset Global Investments, announced the termination of its $5.8 billion purchase contract for Anbang’s 15 hotels, accusing the Chinese insurer of breaching contract, Reuters reported.
“Among other things, AnBang had failed to timely disclose and discharge various material encumbrances and liabilities impairing the hotels and failed to continue the operation of the hotels in accordance with contractual requirements,” Mirae said in a statement provided to Reuters. Anbang did not provide comment to the publication.

The termination comes as U.S. hotel occupancy tanks amid the pandemic and the commercial mortgage-backed securities market seizes up. Billions in hotel loans have been sent to special servicing.

Anbang’s hotel portfolio includes the JW Marriott Essex House in New York, the Four Seasons in Jackson Hole, Wyoming and the Westin St. Francis in San Francisco. Mirae was one of up to 17 bidders interested in acquiring the properties when Anbang was looking for a buyer last year.

Despite initial interest from investors, there were signs of trouble in the deal. Last year, as Mirae and Anbang were hammering out a contract, the insurer discovered a scheme of fake deeds involving six of its 15 hotels. Then, Bloomberg reported last month that Mirae and its lenders were struggling to drum up investor interest in a $4 billion CMBS deal to finance the $5.8 billion deal.

Last week, an entity tied to Anbang filed litigation against Mirae in an attempt to bar the South Korean firm from scrapping the contract. That litigation is still proceeding in Delaware bankruptcy court, and according to a source close to Dajia, the company that took over Anbang’s assets, it is up to the court to determine whether Mirae can back out of the deal.

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All Year’s $346M multifamily portfolio sale to David Werner falls apart
Closing hampered by financing delays, rent reductions

All Year Management’s massive $346 million multifamily portfolio sale appears to have fallen victim to the economic fallout of coronavirus, as financing tightens and tenants struggle to pay rent.

An agreement to sell the portfolio, which covers 73 multifamily buildings in Brooklyn and one in Queens, was announced by Yoel Goldman’s firm two months ago on the Tel Aviv Stock Exchange. The deal was expected to generate about $59 million in positive cash flow for All Year after mortgages were paid off, and the buyer provided a $15 million down payment.

Although the prospective buyer was not named in the Tel Aviv disclosures, New York City property records show that prolific but low-profile Brooklyn real estate investor David Werner was on the other side of the deal.

The sale was set to close within 60 days of the agreement — or by Tuesday, May 5 — but Werner was apparently unable to line up acquisition financing in time, according to a new disclosure published Wednesday. The buyer asked for an extension, but without an additional $5 million extension fee as required by the agreement. All Year denied the request.

On Tuesday, Werner informed Goldman’s firm that the deal was off, and accused All Year of violating the terms of the agreement — which would require the seller to return the $15 million down payment. Alleged violations include failure to provide information about properties in the portfolio, reducing rents for tenants and entering into contractual agreements with tenants without Werner’s approval.

Werner is known as one of the most active syndicators of big real estate deals in New York, making quick and lucrative exits shortly after closing deals.

The scrapped sale included 611 residential units and 18 commercial units. Elsewhere in its portfolio, All Year announced in February that it was close to securing a $675 million refinancing for the Denizen Bushwick, a massive mixed-use project on the former Rheingold Brewery site. That deal has not closed, according to property records.

The developer has also announced that it is seeking to sell or refinance the William Vale hotel and office complex to pay down Israeli bonds. The hotel is currently closed due to the coronavirus.

All Year did not respond to a request for comment. Werner could not be reached for comment.

List of Properties in All Year’s Scrapped Portfolio Sale

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They should have asked him to turn around for that photo, because that's the side people are going to have to get used to seeing of him.

Aby Rosen seeks to rework Chrysler Building ground lease
Ground rent is $32.5M each year

May. 06, 2020 06:00 PM
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Aby Rosen and the Chrysler Building (Credit: Lev Radin/Pacific Press/LightRocket via Getty Images)

Aby Rosen and the Chrysler Building (Credit: Lev Radin/Pacific Press/LightRocket via Getty Images)
RFR Realty’s Aby Rosen is in talks to restructure the ground lease for the Chrysler Building.
Rosen, along with partner Sigma Holding GmbH, bought the landmark tower’s ground lease for $151 million from Tishman Speyer and an Abu Dhabi government fund last year. They pay Cooper Union, which owns the property, $32.5 million annually in ground rent, along with more than $23 million for what the building would typically owe in property taxes (though as a nonprofit, Cooper Union pockets this sum).
Those charges are expected to jump to $67 million by 2029. It’s unclear what changes Rosen is seeking to the terms of the lease, but the school may be exploring reducing the ground lease rates to ensure a flow of rent from RFR and avoid having to take over the property, Business Insider reports.
Since buying the ground lease, Rosen has cleared out the small retailers in the building with eyes on a reimagined retail arcade, as well as “destination dining and entertainment.” With the coronavirus crisis, the company will likely have a hard time filling those spaces.

“Those questions around retail and the timing of when it comes back haven’t been answered yet,” said Marc Frankel, a leasing executive at Newmark Knight Frank. “I wouldn’t plan on buying a property like the Chrysler Building today and leasing it up tomorrow. If you have the time to wait, everyone believes the market will be back. But if you can’t wait and you need to fill a space now, then you might have a problem.”

Rosen also faced a major rent reset at the Lever House at 390 Park Avenue, and defaulted on a $110 million loan backing the tower. He and RFR co-founder Michael Fuchs sued Tod Waterman, accusing him of fraudulently taking over the ground lease at the Midtown tower in 2018.

Last month, Rosen walked away from more than $600 million in deals. The abandoned deals included a $400 million buy of 900 Third Avenue in Midtown from Paramount Group and a retail condo at 1600 Broadway in Times Square that was on the market for more than $200 million.

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And buyers not only want to walk away, they want their money back. Will courts start setting precedent that contracts are really options?

Superman fights for truth, justice and the American way. The investor who abandoned a deal to buy the building Clark Kent’s Daily Planet office was modeled after is fighting for his deposit back.
Jacob Chetrit is trying to stop SL Green Realty from pocketing the $35 million deposit the company claims he forfeited when he backed out of buying the Daily News Building, people familiar with the matter told The Real Deal.
Chetrit wrote to the escrow agent holding the deposit to request the funds not be released to Marc Holliday’s SL Green. The next step could be a showdown in court.
A representative for Chetrit did not immediately respond to a request for comment. A spokesperson for SL Green declined to comment.
Chetrit withdrew from an $815 million acquisition of 220 East 42nd Street in late March when financing from Deutsche Bank fell through. It was one of the biggest property deals to disintegrate as the coronavirus pandemic froze the debt markets.
SL Green’s president, Andrew Mathias, said at the time that the company would retain Chetrit’s deposit. But the process is not straightforward. Chetrit can ask a judge for his deposit back or try to coerce SL Green to the negotiating table. At the very least, he can make himself a thorn in the company’s side.

If Chetrit goes to court, he’d have to make a case that SL Green was to blame for the deal’s demise, experts said. It’s not clear what argument Chetrit would make, but in such cases buyers often claim the seller failed to disclose certain maintenance issues with a property, or that problems with the title cropped up.

One notorious tactic buyers use when a deal goes sideways is to claim sellers failed to provide complete documentation on tenants’ leases, known as estoppel certificates. Many regard this as a specious argument because it is only raised when a deal goes awry.

Attorney Jonathan Mechanic of Fried, Frank, Harris, Shriver & Jacobson said buyers often have legitimate reasons to get a deposit back, and other times they are grasping at straws.

“You see challenges sometimes that are successful and sometimes that are not,” he said. “There’s not a claim, by the way, that a pandemic happened. That’s not an excuse for not performing.”

Even if Chetrit has no strong legal argument, he could make himself a nuisance and try to negotiate with SL Green to reclaim a portion of the deposit.

To screen out frivolous requests, courts will sometimes require the buyer to post a bond, said attorney Jay Neveloff of Kramer Levin Naftalis & Frankel.
“Most buyers aren’t prepared to put up a bond on a specious claim. A lot aren’t prepared to put their money where their mouth is,” he explained. “The leverage of a buyer isn’t very strong there.”
The busted deal for the Daily News Building has complicated matters for SL Green, which is selling other assets to make up for the expected proceeds of the sale.

Arguments over deposits seem increasingly common as deals large and small fall apart during the pandemic. Investor David Werner, for example, is wrangling to get back $15 million he put down to buy a multifamily portfolio from All Year Management for $346 million. Brooklyn investor Shulem Herman is seeking the return of $457,500 after failing to close on the purchase of properties in Ridgewood and Bushwick.
Werner is claiming All Year failed to provide information about properties in the portfolio and reduced rents for tenants without his approval. Herman says the seller rushed the closing during the city’s shutdown, then defaulted him.

David Goldsmith

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Buyer’s remorse?: How Anbang’s $5.8B hotel deal went sideways
Buyer Mirae is now countersuing to save its $582M deposit

The saga of Anbang Insurance Group’s sale of its $5.8 billion U.S. hotel portfolio has yet another wrinkle.
The would-be buyer, South Korea’s Mirae Asset Global Investments, is now countersuing the entity in control of the Chinese insurer’s assets for the return of its $582 million deposit, accusing it of breach of contract and committing fraud.

It comes after Anbang slapped Mirae with a suit last month intended to get the court to enforce the purchase contract. Anbang claimed Mirae’s termination of the deal was “a classic case of buyer’s remorse” in the face of a global pandemic that frustrated its efforts to secure debt financing.

In a court hearing earlier in May, an attorney representing the insurer’s interest said that Mirae “bet that they could get better terms if they waited and waited and negotiated and negotiated. And, lo and behold, they bet big and they lost big.”
Mirae’s attorneys hit back with a complaint on May 20, accusing Anbang of deliberately concealing further ownership claims of the 15 hotels — problems stemming from a bizarre case of deed fraud that came to light in September.

The Korean investment firm claims in February it was ready to pay a $50 million non-refundable fee to lock in acquisition financing from a consortium led by Goldman Sachs, when the lender’s attorneys uncovered a series of trademark disputes between Anbang and several of the same parties named in the deed fraud case. The parties used alleged arbitration awards from these trademark cases to claim ownership of Anbang’s hotels.

Anbang claims it only learned of these actions in December, and by mid-January it obtained a default judgment that prevented any of the parties from making further ownership claims to any properties noted in the fraudulent filings.
But Mirae’s lengthy countersuit questions the authenticity of the ownership claims. It also put forward a theory connecting the entities claiming ownership of the hotels to former Anbang chairman Wu Xiaohui, who was jailed in 2018. Mirae’s claim that a “Chinese power play” could be behind the disputed deeds is based on an agreement that bears Wu’s signature. (Anbang’s attorneys had blamed the deed fraud scheme on an Uber driver in San Francisco, according to Mirae’s complaint.)

Anbang’s suit called the document in question a “fabrication” and, in court, its attorneys accused Mirae of “jumping into bed with a bunch of fraudsters” by suggesting its legitimacy.

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SL Green sues Chetrit over $35M deposit for scuttled Daily News deal
The REIT is turning to the courts to keep the deposit for what would have been an $815M sale

The botched sale of SL Green Realty’s Daily News building has become a courtroom battle.
The real estate investment trust, one of New York City’s largest commercial landlords, is suing the Chetrit Group to keep the deposit the buyer put down for the $815 million deal that went sideways in late March, Crain’s reported.

The battle for the $35 million deposit was telegraphed earlier this month when Jacob Chetrit asked the escrow agent to prevent the funds from being released to SL Green.

Chetrit was unable to close on the purchase of the Daily News building after financing from Deutsche Bank fell through when the pandemic froze debt markets in March.
The escrow account holding the deposit is managed by Fidelity National Title Insurance Co., which is named as a co-defendant in SL Green’s suit. Fidelity reportedly told both the office landlord and Chetrit that it would continue to hold the deposit in escrow until it received an authorization from both parties, or “final determination of the rights of the parties in an appropriate proceeding.”

In an April earnings call, SL Green said it may seek a new joint-venture partner on the Daily News building and announced its “billion-dollar plan” to increase its cash balances.

David Goldsmith

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Thor Equities sues Mactaggart over latest broken deal
Developer aims to keep Mactaggart’s deposit after $24 million Flatiron District purchase collapses

For anyone who thinks time has become meaningless in the coronavirus era, two big real estate investors are arguing over how long two days is.
Joseph Sitt’s Thor Equities and Mactaggart Family & Partners broke out their abacus and calendar as they argued over a key deadline in a nearly $24 million Flatiron District retail deal, according to a new lawsuit.

Thor’s deal to sell 933 Broadway to Mactaggart fell apart earlier this month. And now Thor is suing to keep the latter’s $1.2 million deposit.

A spokesperson for Thor declined to comment. Mactaggart did not respond to inquiries.
According to the lawsuit filed Wednesday, both sides agreed to a “New York style” closing in 60 days when they hammered out a contract in March, meaning no specific time was set.

In order to complete the deal, Thor was required to provide Mactaggart with documentation for leases in the building known as estoppel certificates two business days before the scheduled May 11 closing, which Thor interpreted to mean on or before Thursday, May 7.

The building’s tenants include Godiva and Le Pain Quotidien, and estoppel certificates are frequently a source of contention when deals go sideways. Le Pain Quotidien filed for bankruptcy Wednesday.
Mactaggart argued that the certificates were due by 9 a.m. Thursday. Just before 2 p.m. that day, Mactaggart sent Thor a letter terminating the deal, using the seller’s failure to provide the estoppel certificates as justification.

One week later, Mactaggart’s attorneys provided what Thor considers “a ludicrous analysis of how to count days to reach the conclusion that ‘two days’ before an event really means ‘three days.’”
The would-be buyer claimed that the 9 a.m. deadline actually gave Thor the “benefit of the doubt” and it should have been “nine hours earlier at midnight,” according to the lawsuit.

“Meaning that the deadline to supply the estoppel certificates really expired at the end of the day on May 6, three business days before the closing date,” Thor’s attorneys wrote.
Thor claims the real reason Mactaggart backed is because the buyer failed to line up financing for the purchase — a victim of the coronavirus crisis.

The dispute is just the latest tussle over security deposits to arise from busted deals.
SL Green Realty is suing Jacob Chetrit to get its $35 million deposit left in limbo when Chetrit walked away from a deal to buy the Daily News Building for $815 million.

Investor David Werner is also trying to get back $15 million he put down to buy a multifamily portfolio from All Year Management for $346 million. Brooklyn investor Shulem Herman is seeking the return of $457,500 after failing to close on the purchase of properties in Ridgewood and Bushwick.

Werner is claiming All Year failed to provide information about properties in the portfolio and reduced rents for tenants without his approval. Herman says the seller rushed the closing during the city’s shutdown, then defaulted him for not completing the transaction on time.

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Turnabout is fair play?
Chetrit’s $115M Diamond District deal fizzles
ELO Organization failed to close on18-story building at 15 West 47th Street

A $115 million deal for a Diamond District building that’s lingered on the market since 2017 has fallen through.
Ray Yadidi and Isaac and Eli Chetrit had planned to sell 15 West 47th Street to the ELO Organization, but the buyer failed to close, Crain’s reported. The 18-story, 120,790-square foot building, which sits between Fifth and Sixth avenues, has been on the market since 2017.
The ELO Organization skipped the closing, which was scheduled to wrap up by Monday. The Chetrits and Yadidi sent a letter to the firm to notify it was in breach of contract, according to the publication, but did not hear back.
The Chetrits purchased the building in 2012 with Yadidi’s Sioni Group for $62.5 million in 2012, and had hoped to sell the commercial property for between $190 million and $200 million. Diamond and gem tenants lease out the first floor of the structure.

The Diamond District deal is not the only sale to have fallen through amid the coronavirus pandemic. Most notably, Jacob Chetrit — cousin to Isaac and Eli — had to nix a $815 million deal to buy the Daily News Building from SL Green Realty after his lender, Deutsche Bank, backed out.

SL Green has since sued Jacob Chetrit over the $35 million deposit.