If at first you don’t succeed, try, try again before further devaluing an already disastrous project.
Judge Barry Ostrager delivered that message Tuesday to Fortis Property Group and Valley Bank.
The state jurist urged the developer and its lender at 161 Maiden Lane to try mediation once again to resolve a foreclosure proceeding and other litigation related to the unfinished, tilting Financial District tower.
Ostrager gave the bank and developer until Friday to say whether they will re-enter mediation, warning that failing to do so would result in further devalue the condominium project, formerly One Seaport but now called Seaport Residences.
When Ostrager retires in December, a judge new to the case will be buried by an avalanche of discovery documents just filed in the foreclosure proceedings and Fortis’ lawsuit against the bank.
“Our top priority is to work with all parties to reach an agreement and to complete this project so future residents can enjoy one of the most beautiful properties in New York City,” Richard Bamberger, a spokesperson for Fortis, said in a statement.
Fortis believes it will cost $45 million to complete the tower. Construction was suspended in 2018, two years after it began, because the building was leaning slightly, a problem that could worsen if the cause is not identified and corrected. The foundation has been eyed as a culprit.
Messages left for an attorney for Valley Bank, formerly Bank Leumi USA, were not immediately returned. In an Aug. 21 letter to the judge, attorney Steven Mandelsberg said the lender was “willing to confer with [Fortis] in good faith at the appropriate time” but believed the parties’ motions for summary judgment should be decided first.
The judge criticized the parties in his order, writing that their “unwillingness to conclude a commercially reasonable settlement has been an exponential devaluation of the collateral during a multi-year period.”
Fortis and Leumi agreed to enter mediation in the summer of 2021, but those talks fell apart.
Ostrager noted that as the multitudinous legal fights over the project have dragged on, lending rates on construction financing have gone from “extremely reasonable” to prohibitively expensive.
Ostrager also said the lenders and developer have shown ”callous disregard of the various mechanics lienholders who were led to believe that construction would continue.” A number of contractors and subcontractors have filed mechanic’s liens alleging they were not paid fully for work on the project.
Bank Leumi USA, which is now part of Valley Bank, is seeking to foreclose on a $120 million loan on the 60-story tower. Fortis is also suing the bank, alleging that it wrongfully stopped funding the project after promising deadline flexibility and getting the developer to throw in another $20 million in equity.
The project’s problems date back to at least 2017, when a construction worker fell to his death, shutting down the site for months. Other delays followed as construction managers and subcontractors came and went. Fortis and one of its construction managers, Pizzarotti, traded lawsuits over the building’s tilting three inches to the north.
Ostrager’s order indicated that a condition of mediation should be the creation of a fund for the mechanic’s lienholders. The judge also noted that a potential surety bond may help resolve the legal disputes.
A status conference is slated for Dec. 6, which was originally a trial date.
