3 Sutton Place, a planned 950-foot-tall, 68-story Manhattan condo tower, won’t be materializing along the East River. After defaulting on $128.8 million in loans from lender Gamma Real Estate, developer Bauhouse Group‘s site at 426-432 East 58th Street will face foreclosure sale February 29th.
The site currently houses three contiguous five-story apartment buildings, which Bauhouse purchased to make way for the massive Foster + Partners-designed midtown skyscraper project. In January, Bauhouse defaulted when they were unable to secure a construction loan to pay off Gamma and begin construction on the tower.
Initially, Bauhouse received a temporary restraining order to block the sale, but a Manhattan judge struck down Bauhouse’s request for injunction this week. The court heard arguments about improper loan default charges and a restrictive confidentiality agreement implemented by marketing company Eastdil.
In a statement to The Real Deal, Stephen Meister of Meister Seelig & Fein, which represents Bauhouse, argued that Gamma’s confidentiality agreement improperly prohibited a bidder from giving “information about the project to his own lender” before the foreclosure auction.
Meister says that restriction has the goal of “chilling any bids,” keeping Gamma as the sole bidder for the project.
The suit also claimed that Gamma was demanding $45 million above the original $147.25 million loan principal, as well as charging “over $100,000 a day in default rate interest.”
When the auction takes place, nine bidders are expected to participate, according to Crain’s New York, but some real estate experts expect ultimate control will go to Gamma.
If Bauhouse is able to halt the foreclosure proceedings by some other means in time for the auction, they may still be limited by a grassroots challenge. The newly-formed East River 50’s Alliance is attempting to impose height restrictions on new buildings east of First Avenue from 52nd Street to 59th Street. Their plan was recently endorsed by Community Board 6.