CHICAGO-Justice Sallie Manzanet-Daniels of the New York Supreme Court Appellate Division has approved an injunction blocking the foreclosure sale of 500 W. Monroe, a 46-story office building here. Broadway Partners sought the halt to the sale, planned for Sept. 14, by lenders Transwestern Commercial Services and Piedmont Office Realty Trust.

In a motion to request the injunction, Broadway claimed that the lenders conspired to block a loan extension application, causing a default situation. Manzanet-Daniels has approved the injunction pending determination of the motion. None of the companies involved responded to questions about the case.

Transwestern is based here, while Piedmont is based in Georgia and Broadway is based in New York City.

Broadway bought the building in 2007 by borrowing $340.5 million. Morgan Stanley Mortgage Capital Holdings was the main originating lender, but was succeeded by Piedmont.

The owner avoided default in early 2009 by reaching a debt extension agreement with Transwestern. As part of the agreement, Transwestern took over management of the building. The 973,100-square-foot tower includes tenants such as GE Capital, and Marsh & McLennan.

However, in an Aug. 31 motion, Broadway accuses the two lenders of breaching contract and fraud by “colluding and conspiring” to block the owner from extending its loan. Specifically, Broadway claims Transwestern would not allow formerly-agreed to fees to be applied to a loan extension until August 2012.

“Transwestern…refused (to) apply the 2010 Excess Cash Flows to pay the extension fees, notwithstanding that the 2010 Excess Cash Flows were more than sufficient to cover such fees. Transwestern…refused to negotiate in good faith concerning the payment of the extension fees,” according to the Broadway’s motion.

The owner also claims the lenders made a secret agreement to foreclose on the building. “Transwestern entered into a side agreement with Piedmont under which it would receive some payout or other benefit in order to cooperate with Piedmont’s plan and to frustrate Broadway’s rights to extend under the forbearance agreement,” according to the Broadway motion.

Broadway also says it has the right to terminate Transwestern as property manager as of Aug. 17, but the lender is still at the building. “If Transwestern Commercial is permitted to continue to act as exclusive leasing agent and/or managing agent of the property after the conclusion of its respective agency periods, Broadway will suffer immediate and irreparable harm in that Transwestern will continue to own the property, placing the entire property at risk,” according to the Broadway motion.

Instant Insights /

Judge Halts Foreclosure on 46-Story Tower

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