In a sign of deepening trouble for a problematic condo project, the funding agreement for Manhattan’s so-called Leaning Tower of Seaport has fallen apart.
Fortis Property Group’s unfinished 60-story luxury building at 161 Maiden Lane has been besieged by construction delays and litigation for years. And now its lenders have stopped funding its construction loan.
Issues first arose in 2017 when a construction worker fell to his death while working on the project, leading to a manslaughter plea by a subcontractor. The next year a crane operator sent a concrete bucket smashing into the 34th floor, causing concrete to pour onto the street below. And in 2019, a contractor sued Fortis alleging a misalignment that caused the building to lean three inches to the north, giving rise to its unofficial moniker.
This month a lender group led by Bank Leumi USA claimed that the project’s construction loan it originated in 2016 is now delinquent. It tapped the brokerage Newmark Knight Frank to sell the $120 million loan.
Behind the scenes, Fortis and its lenders are in a heated legal battle, with both claiming that the other has reneged on its contract. Construction of the tower has come to a halt.
In a lawsuit filed in New York Supreme Court, Fortis alleged the lenders stopped funding the construction loan $30 million short of its full amount. The development group alleges that the Bank Leumi USA-led lending group failed to fund a single dollar on the loan since March 2019.
Fortis claims it renegotiated its loan amendments in March. Under the new proposal, Fortis asserts, the lenders were required to fund the loan even if the project went over its budget and fell too far behind schedule to meet its completion date.
Fortis agreed to put down an additional $20 million of equity into the property to fund the loan under these new terms, according to the complaint. But suddenly the lenders told Fortis they would not fund the loan any further and would seek another $25 million of additional equity or collateral into the property, the lawsuit alleges.
But the lenders argue that the developer is to blame for the 670-foot tower’s problems, citing Fortis’ lengthy construction delays and consistent need for cash infusions. The lenders claim they extended the completion date required by the loan three times, from April 2018 initially to next year.
Even with these extensions, Fortis exceeded its budget and failed to get a temporary certificate of occupancy, a condition of funding the remainder of the loan.
Bank Leumi claimed that the project’s inability to receive the certificate has made it difficult to sell units in the project. At one point, buyers had signed contracts for 71 of 99 units, but because of the delays, all but eight have been rescinded, according to the Bank Leumi USA’s motion to dismiss.
Bank Leumi claims that Fortis has been in default since it stopped paying interest on the loan June 1.
An attorney representing the lenders in the suit declined to comment. Bank Leumi USA also declined to comment.