Boston Properties allegedly owes Harry Macklowe $30M in consulting fees, according to lawsuit

By Adam Pincus

The real estate investment trust Boston Properties was accused in a lawsuit filed yesterday of not paying developer Harry Macklowe up to $30 million the REIT allegedly owes in consulting fees related to the sale of 510 Madison Avenue ten years ago.

The suit filed in New York State Supreme Court alleges that the parties signed an agreement at the time of the 2010 sale that sketches out when and how much the REIT would pay Macklowe for consulting work. The payments depended on the leasing status of the building. But the agreement also describes a lump-sum payment at the end of the 10-year agreement, according to the court filings. The suit does not name Boston Properties as a defendant, instead it names its ownership entity, BP 510 Madison Ave LLC.

Boston Properties, according to the complaint, has made no payments, even as news reports and public filings cited by the suit indicate the building has met the conditions that would trigger the payments. Harry Macklowe is founder and chairman of Macklowe Properties.

The allegations laid out in this and any lawsuit filed in New York State Supreme Court are the product of one side of a dispute and may or may not be a complete and accurate description of the facts.

These financial incentives came as the sale of the 350,000-square-foot Plaza District tower included no payments to Macklowe for developing the building. The building was sold following the financial crises which began in 2008.

This dispute comes nearly four months after the New York Post reported that Macklowe was withholding an approximately $200,000-per-month rental payment to his landlord at the GM Building at 767 Fifth Avenue, Boston Properties.

A Boston Properties press release from August 20, 2010, announcing the 510 Madison sale agreement states that the $280.5 million sale price was the value of the debt and accrued interest, implying the sale price included no material gain for Macklowe.

But the release also noted Macklowe could profit at some time in the future, “and he may be entitled to additional payments depending on the performance of the property.”

The press release was issued on the date the contract was signed. The sale closed on September 24, 2020.

The agreement contemplated a $1 million payment once the building was “stabilized,” and another $1 million if the average rent was above $90 per square foot. There was also an annual bonus if the building achieved its “cumulative preferred return.” In addition, there was contemplated a final payment which would equal the annual bonus figure for the last year of the 10-year agreement multiplied by a factor of 10.

The filing says Macklowe, “is entitled to a judgment awarding him: (i) the full $2 million Fixed Fee, (ii) Additional Fees for Fiscal Years 2015-2019 in a total amount believed to be excess of $11 million, (iii) a Final Fee of approximately $20 million, (iv) a full accounting of Defendant’s Books and Records.”

The document purported to be a copy of the agreement can be found at the link or below.

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