By Eric Hornbeck
An attorney for real estate developer The Related Cos. LP told a New York state judge Tuesday that Related doesn't owe part of a $194.7 million guarantee for a Colorado ski development project because lenders sabotaged its efforts to finish the project.
The dispute involves a complex, failed agreement to develop a new base village in the ski town of Snowmass, Colo., with condominiums, hotels and retail space, according to court documents. Hypo Real Estate Capital Corp. and other banks loaned Related and its affiliates $520 million to develop the project, and Related and its president, Patrick Smith, signed a guarantee under the loan agreements. When the project failed, Hypo sued Related for $194.7 million under the guarantee.
During a hearing Tuesday, Related attorney Mark Walfish of Katsky Korins LLP said that the judge should deny Hypo's motion for summary judgment on its first cause of action, which claims Related owes the first $32.5 million of the guarantee.
Walfish said Hypo purposely interfered with Related's ability to meet certain benchmarks that would release its guarantee obligations — specifically, selling $380 million worth of condominium units in the project and making a land release payment for part of the project — by improperly withholding funds from the project.
But Celia Goldwag Barenholtz of Cooley LLP, who represents Hypo, said that Related hadn't put in any evidence beyond affidavits showing that Hypo had somehow interfered with its ability to meet the preconditions.
"These two milestones never happened," Barenholtz told the judge. "This is not the frustration of a condition precedent."
But Judge Ramos said he was reluctant to accept that premise when there hadn't been any discovery in the case so far.
"We're so early in the litigation, it makes me nervous when we haven't had discovery yet," he told the attorneys.
On Feb. 16, an intermediate New York state appeals court dismissed a related suit in which a Related affiliate alleged that the consortium of banks that lent it the money for the development had doomed the project when they pulled the plug on their construction lending obligations in 2009 to shore up their own finances as they were rocked by the financial crisis.
Hypo Real Estate Capital Corp. is represented by Celia Goldwag Barenholtz of Cooley LLP.
The Related Cos. LP is represented by Mark Walfish of Katsky Korins LLP.
The case is Hypo Real Estate Capital Corp. v. The Related Cos. LP et al., case number 650871/2010, in the Supreme Court of the State of New York, County of New York.
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