REEC accused of failing to make ground rent payments at East Village development

By Adam Pincus

Developer Real Estate Equities Corp. was accused of falling behind in ground rent payments on an office development site in the East Village, according to a lawsuit filed yesterday in New York State Supreme Court.

REEC has disclosed plans to build an approximately 45,000-square-foot office building with the address 1 St. Marks Place. The parcels also have the addresses 23, 25 and 27 Third Avenue. The city issued a new building permit for the project in February 2020.

The landlord Gabay & Ameri II LLC, an entity based in Florida, said in the lawsuit that the ground lease terms obligated REEC to pay $110,524 in monthly rent payments due by January 1 and February 1, but did not make the payments. In addition, the developer is obligated to maintain the site free of liens, and a $61,000 mechanic’s lien was filed last fall, according to the complaint.

Court filings represent the position of one party and are not necessarily complete or accurate. REEC has not yet responded in court filings. REEC did not immediately respond to a request for comment.

REEC signed the ground lease in 2017, and in 2018 filed plans for a 9-story, 45,000-square-foot office building. In 2019 REEC obtained a $79.1 million construction loan from South Korean firm Hana Financial Group. Hana sold the $48 million senior debt to Madison Realty Capital and retained $31.1 million as a mezzanine loan, The Real Deal reported at the time. In February 2020, the city issued a permit for construction.

According to the complaint, REEC did not make the January or February ground rent payment, and the landlord sent several default notices.