Tuesday, October 27, 2009

Block 37 redux - "show" me the tenant!

So, more details are out on Block 37. Work from the awesome team at Crain's is that apparently Muvico walked from its anchor lease at the property but offered to come back at better (read: cheaper) terms.

In other words, it looks to me like the old tenant cramdown.

Freed, not wanting to lose the deal and presumably sensing it could still make money, takes the deal to Bank of America. Why? Because the lender as a rule in deals like this has the right to approve major leases or material modifications to existing leases. Sometimes there will also be specific criteria under which the borrower can enter into leases without lender approval. And Freed is telling us the lender said no, and did so "improperly." You can read the story to get the gory detail being alleged in Freed's motion to dismiss, the gravamen of which is that it thinks the banks wants to capitalize on Freed's work to lease up the property and profit from it.

Now, the lender can argue that it did nothing improper, negotiated for two years to modify the old Mills deal without coming to satisfactory terms and the fact of the matter is the project is millions over budget and Larry Freed has violated his net worth covenant (by pumping money into the deal?). The bank's lawyer is an old colleague (and an excellent lawyer) to whom I (indirectly) referred a case a year or two ago, so you know I think he's good too. It'll be interesting to see how this plays out next week in front of Judge Brennan. I may even have to show up for this one.

1 comments:

Kara said...

Banks are notorious for things like this. Too bad normal people can't run tenant checks on banks. Just doesn't seem fair.

 
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