Landlord threatens to end JTRE’s $70M Wall Street lease, Terzi files to block termination

China Sonangol, which owns the fee at 23 Wall Street, sent a notice last month threatening to terminate JTRE’s $70 million ground lease, if it does not pay $500,000 in allegedly late rent payments, according to court papers JTRE filed yesterday in Manhattan State Supreme Court.

The ground landlord, through the entity CS Wall Street LLC, send a notice of default to JTRE, led by retail-focused investor Jack Terzi, on July 21, stating that two rent payments of $250,000 each were overdue, for June 1 and July 1.

The notice says if the rent payments are not made by Friday, August 20, the lease could be terminated as soon as ten days later.

Terzi, through his attorney, Y. David Scharf of Morrison Cohn, asserts the lease in fact is not in default, and states the lease payments are not due until April 2022 at the earliest, based on a schedule of events laid out in papers supporting the Yellowstone injunction.

A Yellowstone injunction freezes the status quo of the lease and would bar an eviction while the parties negotiate their dispute.

China Sonangol has not yet filed response papers.

Terzi signed the long-term lease that starts at 30 years and includes two renewal options for 30 and 39 years, totaling 99 years. The commercial property has office and retail space.  The net lease for the retail condo units was signed December 18, 2019, and amended November 5, 2020. China Sonangal bought the property for $150 million in 2008 from Africa Israel.

According to the complaint: “Landlord delivered a Notice of Default and Twenty (20) Days to Cure, dated July 21, 2021 (the “Notice of Default”), which Tenant received on July 23, 2021, threatening to terminate the Lease if the alleged default on payment of rent is not cured by August 20, 2021. But the default alleged in the Notice of Default is no default at all. That is because the rent payment obligation was not identified in the Lease as commencing on a particular date. Rather, pursuant to Section 3.5 of the Amended and Restated Lease, the Rent Commencement Date was to commence ‘on the date which is the day after the last date of the 15th month following the Commencement Date.’ Pursuant to Section 2.2 of the same agreement, the Commencement Date would occur 30 days after ‘the disbursement of the Down Payment Funds in accordance with the Closing and Escrow Instructions.’ At the earliest, those funds were ‘disbursed’ on November 10, 2020, the date that Landlord’s counsel transmitted an escrow release letter to the escrow agent. The Commencement Date under the Lease was thirty days after the funds were disbursed, or December 10, 2020. Fifteen months from December 2020 is not June 1, 2021 – the date Landlord’s Notice of Default claims as the Rent Commencement Date. Instead, fifteen months pushes the Rent Commencement Date into April of 2022, at the earliest. Thus, there is no basis for a default as the Tenant’s rent obligations have yet to commence. Consequently, a Yellowstone injunction should issue to maintain the status quo and preserve Tenant’s leasehold rights pending trial. An order also should issue tolling the running of the period in which Tenant may cure, or diligently commence curing, the default set forth in the Notice of Default, so that in the event a default is found to exist by the Court, Tenant has a reasonable period of time to cure that default.” LINK

Direct link to Acris document. link