ANGLO IRISH Bank has accused a US businessman of seeking to thwart its attempt to sell a $150 million (€114 million) loan it issued to fund a high-end residential and commercial development close to the stock exchange building in New York.
The loans include $36 million issued in September 2009, eight months after Anglo had been nationalised.
The bank is seeking to sell the loans and the associated deeds to the property, as the developers of the building are in default.
The property was being developed by a businessman, Asher Roshan Zamir of Zamir Equities, which has converted commercial properties in central Manhattan into high-end residential units. The Broad Street building was to be a luxurious development. A penthouse apartment was pre-sold in 2008 for $7.8 million.
However, delays in the construction have meant 91 contracts to purchase apartments worth $110 million have since been cancelled.
Senior vice-president of Anglo Terence Baydala filed an affidavit last month to the New York Supreme Court in which he set out the bank’s defence in a case taken by the Delshah Group LLC, a substantial New York real estate business whose principal is Michael Shah.
He said Mr Shah was seeking to thwart the sale because his effort to buy the loan was unsuccessful. Delshah had itself invested $4.1 million in the development in 2007 by purchasing shares from Zamir, and was taking the case “derivatively” on behalf of Zamir’s 40 Broad LLC, to which Anglo made the development loans.
Mr Baydala said he had primary responsibility for loans to 40 Broad to let it acquire and refurbish the property. The loans were issued by Anglo and other lenders, with Anglo acting as administrative agent.
Mr Baydala said in October 2006 the company was given $57.6 million to buy the building, $74.6 million to fund construction and $7.8 million as a project loan.
However, within a year the loans were in default. The loans were restructured and increased by $12 million. The company agreed to put an undisclosed amount of extra capital into the project. However, within 11 months the loans were again in default. As part of a restructuring agreement in September 2009, the loans were increased by $36 million.
In return for the loan, the company entered into an escrow agreement whereby the bank would get ownership of the development in the event of default. The escrow measure was taken as it was “obvious the borrowers were having substantial cost overruns and substantial delays”.
The 40 Broad LLC debt matured on January 31st, 2010. The balance due in December 2010 was $150 million plus interest, late charges, default interest and costs, Mr Baydala said.
When the bank recently began to try to sell the loans, one of the bidders was the Delshah Group. Mr Baydala said it was only after the group was unsuccessful in its bid that it began to question aspects of the escrow agreement “apparently in an effort to induce other bidders to withdraw”.
Mr Shah also wrote to the broker handling the sale, in what Mr Baydala said was a transparent effort to prevent the deal.
While the document forming the basis of the Delshah complaint is not publicly available, a document filed by Anglo attorney Paul Samson on New Year’s Eve says the complaint includes a claim the loan being sold by Anglo is now only worth $80 million.
He pointed out that while Delshah was taking a case “derivatively” on behalf of 40 Broad, it was itself suing 40 Broad and Mr Zamir in a separate action before the New York courts.
