Things have been mighty quiet at 20 Henry Street in Brooklyn Heights since the 38-unit conversion and new construction project was pulled (temporarily, it was reported at the time) off the market. Things behind the scenes have not been as quiet, though. In fact, AIG, which put almost $10 million in equity into the deal, has sued the developers Shelly Listokin, Stan Listokin and David Tropper (all of whom are principals in Urban Realty Partners and developers of The Arches in Cobble Hill) for “breach of their contractual obligations…under agreements relating to the acquisition, construction and development of residential condominiums at 20 Henry Street.” According to the suit filed in New York State Supreme Court on March 19, the developers were contractually obligated to fund any cost overruns beyond the projected construction budget of $12.7 million; when the budget ballooned to over $20 million as the project progressed, the developers failed to make up the difference. Under the terms of their agreement, AIG can, and has, demanded to take over the project and requested that the developers come up with more than $20 million (a number that includes estimates of soft costs and legal costs in addition to hard construction costs) to enable them to do so.
In the suit, AIG also requests that the defendants “take all steps necessary to secure and protect the Property to prevent further deterioration of the Project” and notes that “there is a substantial risk that the improvements to this unique landmark property will physically deteriorate beyond salvage before final judgment is entrested” and that “there is an equal risk that the Project will not be able to be completed in time to qualify for tax exemptions and abatements under New York City’s J-51 tax incentive program, the loss of which jeopardizes the long-term economic viability of the Project.” The developers issued this statement to us through a representative: “We are working to resolve things quickly with AIG, so that we can proceed and see the project completed. It’s a very difficult environment for real estate development all over New York right now.” While a deal’s a deal, both AIG and the lender, Bank of New York, bear some responsibility for the current situation: The two financial institutions allowed the three developers to get away with contributing a mere $1.7 million of equityâ€”or about 4 percent of the deal. It’s not surprising that they don’t feel it’s in their interest to pony up multiples of that amount in a sinking market. The people with money in the deal aren’t the only potential losers in all this: Brooklyn Heights neighbors are the ones who will have to live with a half-finished site for years if the project cannot be salvaged. Disclosure: 20 Henry Street is a former advertiser on Brownstoner.
Update on 20 Henry [Brownstoner] GMAP
Condos in Contract at 20 Henry Street [Brownstoner]
First Pricing Clues at 20 Henry [Brownstoner] DOB
20 Henry Swings Back Into Action [Brownstoner]
From Mints to Condos at 20 Henry Street [Brownstoner]