Developer of Stalled Job Sues Chelsea Landlord for $100M

A lawful dispute blocking progress of a single of the very last empty lots in West Chelsea has taken a spectacular twist.

Just after six several years in court docket, mired in discovery and docket filings, Israeli financier Jonathan Leitersdorf seems all set to stroll away from his long-planned advancement at 182-188 11th Avenue. But he does not program on leaving empty-handed.

The Leitersdorf firm that signed an 88-12 months ground lease for the house, Audthan LLC, is now suing its landlord for breach of deal. It seeks at minimum $100 million in damages in an amended complaint filed Tuesday.

Audthan alleges that Gurdayal Kohly, an Indian immigrant who purchased the house in 1979, has waged a “scorched-earth campaign” to halt the 58,000-sq.-foot job.

Development has been frozen due to the fact 2009, when a choose found that a previous leaseholder experienced harassed tenants at the Chelsea Highline Hotel, a hire-controlled, solitary-home occupancy setting up at 565 West 23rd Street, on the made 50 % of the task site.

Therefore, Kohly was ordered to renovate the run-down hotel at the northeast corner of 11th Avenue and West 23rd Avenue into 15,000 sq. toes of permanently economical housing.

A single issue: Kohly’s not a developer. He doesn’t even have any other financial commitment qualities.

“Since I do not have — and without a doubt have in no way experienced — the money to develop the land myself, I have generally net-leased it,” wrote Kohly in an affidavit. “Net-leasing is the only viable option for me to be in a position to recognize any profit from the property.”

Needing a enhancement spouse, Kohly in 2013 leased the residence to Audthan for 40 years with an alternative to extend the deal for a further 48. While Audthan experienced not harassed the tenants, it was continue to obligated to execute a remedy — an costly proposition. But Leitersdorf had a strategy to pay back for the very affordable models, make a revenue and generate a outstanding home for himself.

On the open up portion of the land he would make Skybox Chelsea, a 250-foot constructing with luxury condominium units and a five-story penthouse for his individual use. Reflecting present-day Chelsea’s inventive sensibilities, the ground floor would characteristic an art museum and non-public gallery with 30-foot ceilings.

Almost immediately, the two sides fell out of stage.

Kohly soured on the lease arrangement, which proven only modest lease will increase for the floor he owned, according to Bradley Silverbush, an legal professional for Kohly. It also failed to factor how successful Skybox could be.

“He was taken gain of,” explained Silverbush.

Even though Kohly’s misgivings fermented, Audthan established about readying the web site and preparing a harassment heal to unlock enhancement rights. Audthan claims it has spent $34 million on hire and challenge preparations.

But its get rid of application and enhancement prepare arrived less than attack by an sudden resource: its own spouse, Kohly.

For 6 yrs, the two sides have waged a lawful war of attrition. They have argued in advance of the court, cycled as a result of attorneys, appeared before mediators and filed a lot more than 1,000 things in the docket. And still, the tract has established intractable.

But a breakthrough seems imminent. This April, Kohly’s attorney requested the Division of Housing Preservation and Enhancement to reject Audthan’s proposed cure, which has languished in the town paperwork considering the fact that December 2015. In his letter, Silverbush mentioned four tenant harassment lawsuits that Audthan unsuccessful to point out in its proposal, which he identified as a “sham.”

The next thirty day period, Silverbush sent the company an additional email that would wholly improve the course of the lawsuit. “[Kohly] will not, and will hardly ever, approve any version of a proposed get rid of settlement, since no cure is warranted in gentle of adjudicated harassment of tenants” by Audthan and nonprofit Clinton Housing Improvement Enterprise, the proposed administrator, he wrote.

This summertime, just after expending tens of hundreds of thousands of dollars and fifty percent a 10 years, it grew to become apparent to Leitersdorf that he would not be establishing the land any time quickly. So he threw in the towel on Skybox Chelsea.

On July 26, a Monday, his company sent Kohly a letter saying it intended to surrender the premises, which include obligation for the SRO resort, at the end of the week. Kohly saw the transfer for what it was: hardball.

“What are they gonna do?” his law firm, Silverbush, mentioned of his consumer. “Take above a resort at 5 o’clock on a Friday with no management working experience?”

Audthan’s amended grievance this 7 days argues that Kohly repudiated the lease by vowing not to indicator on to the overcome settlement: If Audthan just cannot execute the get rid of, it can’t develop. And if it can’t create, its deal with Kohly is pointless.

But Kohly has his individual card to enjoy: In the lease, both sides waived the correct to damages if either a person fails to cooperate. So back to court they go.

Call Joe Lovinger