UPDATED, 8:48 p.m., June 19: Vornado Realty Trust is facing an $18 million lawsuit from Derek Johnson, an investor in its failed Harlem Park office development, who claims the company sabotaged the project and neglected to pay him his due from the sale of the site.
Vornado led an investment group that planned in 2008 to develop a 630,000-square-foot office complex — with Major League Baseball’s cable network as the anchor tenant — on a vacant lot at 1800 Park Avenue at 125th Street. In April, however, Vornado sold the development site for $65 million to billionaire Bruce Eichner, who plans to develop a 596,000-square-foot residential tower there. Vornado reportedly realized a $22 million net gain from the sale.
Johnson, the CEO of Integrated Urban Holdings and the man credited with helping rescue the Apollo Theater, was one of the original partners, along with San Francisco-based McFarlane Partners and the California Public Employees Retirement System, or Calpers.
In a lawsuit filed Monday in New York State Supreme Court, Johnson claimed that Vornado sat on the project for years after MLB backed out due to considerable delays, and failed to pay him for considerable efforts to find new tenants and salvage the project.
“I was encouraged to then give it the college try to the extent that I could bring them tenants and a buyer and that I would be compensated,” Johnson told The Real Deal today.
In a statement to The Real Deal, a spokesperson for Vornado said that, “Mr. Johnson has already received substantial fees, and he is not entitled anything more under the governing agreement. This lawsuit is without legal or factual merit.”
A spokesman for Eichner declined to comment, saying the deal had not yet closed.
Johnson’s potential tenants included Inner City Broadcasting, the parent firm of WBLS-FM radio, and the National Urban League, he said in court papers. He also lined up entities, such as the New York City Economic Development Corp., and private sector investors, such as the Related Companies and Scott Resnick, who said they would consider buying out Vornado for $50 million, Johnson claimed in the suit.
However, Vornado refused. In Johnson’s eyes, the REIT engineered the delays to “blight” the project so it could buy out Calpers at a cheap price. Johnson cited statements from Vornado Chairman Steven Roth about a similar effort to allegedly blight the former Alexander’s Department Store site at Lexington and East 59th Street, as well as allegations that the company blighted the original Filene’s Basement site in Boston.
Vornado in 2011 bought out Calpers for $12 million after the fund invested $41 million, according to the suit.
Johnson maintained that the project could have fetched a higher price, given that it was never put out to bid and that Eichner’s deal was unsolicited.
“They never did anything that suggested that they were ready to liquidate at a rational price point,” he said.
A court hearing is scheduled for July 2, where Justice Barbara Kapnick will decide whether Johnson can inspect records related to the Eichner deal and the Calpers buyout.