Minnesota developer fights for historic building’s future
The Plaintiff is the owner-developer of the beloved property at the corner of Nicollet and 7th Avenue. In the past four years, 601 Minnesota have executed a $ 350 million redevelopment of the historic property. The 1.2 million square foot building, which was converted by 601 Minnesota Mezz, offers 9 floors of office space and nearly 300,000 square feet of retail space on the 3 lower floors, including restaurants at first and second floor. It offers unique features such as a rooftop library, as well as a gym and park. The Dayton Project provided over 1,500 construction jobs; there will likely be thousands of additional jobs generated by the occupants of the vast office and retail spaces.
“It will be the first space of this kind in Minnesota,” mentionned Marc Karasick, one of two managing partners of 601 Minnesota Mezz. “We will support the local business community with a designated area for small retail stores and kiosks, specializing in products made here in Minnesota, including those made by local artisans and minority-owned businesses. ”
The project has been largely completed since February 2020, the start of the COVID pandemic. Before the pandemic and local civil unrest linked to the tragic death of George floyd, 601 Minnesota had firm lease commitments from two major tenants and was in advanced negotiations with several others. According to the complaint, during the past 16 months “the Minneapolis the leasing market has been virtually frozen due to COVID-related lockdowns and widespread civil unrest, leading to the closure of retail and office operations across the city. “
Defendant Monarch Alternative Capital LP describes itself on its website as a new York “opportunistic credit and distress” investment fund. According to the complaint, Monarch claims that even though 601 Minnesota is fully up to date in its debt service obligations, it is in technical default, and therefore subject to massive additional potential penalties under the mezzanine loan documents, for not having rented the project by various dates of “barrier to leasing”. The complaint explains that these leasing hurdles were fixed before anyone understood how the double crisis impacted both severity and duration. Minneapolis would be. The affected mezzanine loan is not in default, nor is the mortgage on the property.
The complaint alleges that Monarch is seeking to profit from the crisis to which Minneapolis and its business community by seeking to compel 601 Minnesota to adhere to rental projections established at a time when no one could reasonably have predicted the unprecedented extent to which the pandemic and civil unrest would cripple office and commercial rentals retail in downtown. The record goes on to say, “By refusing to cooperate with 601 Minnesota to overcome rental barriers, and instead trying to capitalize on the current crisis to foreclose the mezzanine loan and steal the property, Monarch has ensured that no other lender will not refinance the Dayton Project. “
601 Minnesota Mezz seeks declaratory relief and injunction and $ 270 million in damages from Monarch. As the complaint states, “a predatory lender … seeks to induce the owner-promoter of a Minneapolis bankrupt real estate project and take over the project for itself. “
SOURCE 601 Minnesota Mezzanine