A partnership that had arranged to acquire the office building 485 Lexington Avenue last year is suing to enforce the sale on allegations that the seller, the real estate investment trust SL Green, had improperly voided the deal.
Two Israeli companies, Optibase Ltd. and Gilmor USA LLC, arranged to purchase a 49.5 percent interest in the nearly one million square foot tower last summer for $250 million with options to purchase SL Green’s remaining stake.
The structure of the sale was complex and allowed the Israeli partners to assume part of the building’s existing $450 million mortgage, an important component in the deal because financing for large office buildings was difficult to secure at that time due to ongoing problems in both the real estate and credit markets.
To take over part of the mortgage however, the venture between Optibase and Gilmor, an entity called Mazal 485 LLC, needed approval from the building’s lender, the bank Wachovia. In its lawsuit, which was filed on February 2nd, the partnership states that SL Green had described that step as a “formality.”
But by the end of the year, Wachovia still hadn’t granted the assumption and Mazal 485 LLC claims that SL Green was privately trying to discourage the process.
As an example of SL Green’s intention to see the deal die, the partnership states in its suit that SL Green executives announced at an annual investor conference in December that the sale was unlikely to go through, even though the approval for the assumption at that point had been extended to January 2010 and was still in play.
The suit says that SL Green revealed its motivation for reneging during that conference, stating that the improving real estate market and its own financial position had put a “de-emphasis on the initial reasons for our sale.”
The deal soon thereafter petered out.
The suit alleges that SL Green is now back in the market with the property, offering it at a higher price.
“But for SL Green’s misconduct, Mazal would have been able to close on the transaction as there was absolutely no legitimate basis for lender to withhold its consent to the deal,” the suit states.
A spokesman for SL Green said: “The sale was contingent upon lender (special servicer) approval, which was not received. Then the agreement expired and SL Green notified the buyer. Those are the relevant facts. The lawsuit has no merit whatsoever.”