Elad discloses $43.5M loss from 2017 water damage at One West End condo
By Adam Pincus
Elad Group disclosed in a petition filed in New York State Supreme Court yesterday that in March 2017 the high-end condominium project at 1 West End Avenue was severely damaged by water, with a loss totaling $43.5 million. The water damage came on March 6, 2017, when frozen pipes at the site burst.
The disclosure comes in Elad’s petition, which it made seeking a judge’s order to temporarily block its insurer at the development site, AIG, from drawing down on a $5.5 million letter of credit Elad posted several years ago.
The parties are in a dispute over insurance payments, and Elad warns it will suffer irreparable harm if the $5.5 million is drawn down.
Elad Group and Silverstein Properties are developing 1 West End Avenue, a 246-unit condo project within a 42-story 990,000 square foot building with residential and retail. The original anticipated completion date, according to the filing, was May 10, 2017. However, in March 2017, the project suffered a “significant water damage event, and [because of] the resulting delay, the project reached substantial completion on July 23, 2018,” according to the papers.
Despite those headwinds, the building obtained its initial temporary certificate of occupancy on July 11, 2017.
Elad submitted claims to its insurers for direct or physical losses of $11.7 million and for a delay and soft costs losses totaling $31.8 million, for a total of $43.5 million caused by the water pipe burst.
Because of hardships facing the project including the global Covid pandemic, the project was not hitting sales targets and its lender has withheld funding pending a discussion, that may result in the developers posting additional capital in exchange for an extension of sales deadlines.
In the filing, Elad says if AIG seizes the $5.5 million letter of credit, it may not have funds to pay contractors, among other potential liquidity problems. To raise capital, Elad signed a contract October 7 to sell a Canadian subsidiary, Elad Canada Realty, which is expected to close in 60 to 90 days.