January 23, 2009 - Developer Ken Swig - Lehman Brothers Holdings, New York NY

Lehman Sues Developer for $368 Million Over Towers

Lehman Brothers Holdings Inc., the bankrupt U.S. securities firm, filed two lawsuits seeking more than $368 million from New York developer Kent Swig, claiming he failed to make loan payments on two former Wall Street office towers.

Lehman Sues Developer for $368 Million Over Towers

Lehman Brothers Holdings Inc., the bankrupt U.S. securities firm, filed two lawsuits seeking more than $368 million from New York developer Kent Swig, claiming he failed to make loan payments on two former Wall Street office towers.

Swig didn’t make payments on mortgage and construction loans for 25 and 45 Broad St. in lower Manhattan and hasn’t paid contractors working there, Lehman said in complaints filed yesterday in New York State Supreme Court in Manhattan.

Real estate developers are converting office skyscrapers into apartments in Manhattan’s financial district just as the credit crisis and recession is cutting demand. Fourth-quarter apartment sales dropped 9.4 percent from a year earlier, according to a Jan. 6 report from Miller Samuel Inc. and Prudential Douglas Elliman.

Attorneys for Swig filed a motion of discovery today in U.S. Bankruptcy Court in New York, claiming that Lehman “continually set arbitrary and unrealistic deadlines and changed the structure and terms of the transaction.”

Swig was given a $231.7 million mortgage for 25 Broad St., and additional construction loans of $19.7 million and $26.7 million in March 2007 to convert the building to apartments, according to the complaint.

At 45 Broad St., Lehman lent Swig $37.7 million in June 2006 and $11.5 million in February 2007. Lehman said it’s seeking to foreclose on the buildings and wants to sell them.

Lehman spokeswoman Kimberly Macleod declined to comment.

‘Unprecedented’ Time

In November, Swig told Crain’s New York Business that Lehman’s bankruptcy cut off his construction loan and that he didn’t have the money to pay workers.

“No one knows what is going to happen,” Swig told the newspaper. “This is unprecedented.”

Swig is an owner and co-chairman of Terra Holdings LLC, which operates several residential real estate brokerages including Brown Harris Stevens, according to the Brown Harris Web site. He’s also president of Swig Equities LLC, an investor and developer of New York City real estate.

Lehman holds about $43 billion in real estate assets, Bryan Marsal, the company’s chief executive officer, told a bankruptcy court hearing Jan. 14.

The case is Lehman Brothers Holdings Inc. v. 45 Broad et al, and Lehman Brothers Holdings Inc. vs. 25 Broad et al., 09100887/09100886, New York State Supreme Court (Manhattan).

Original Story - Bloomberg