As developers Emanuel “Manny” Organek and Marc Blumberg begin work on River House—a mixed-use development at the site of the Old Prince Murat Hotel—a lawsuit they filed against its financing firm is working its way through Baton Rouge federal court.
Their company, River House Partners, sued Grandbridge Real Estate Capital in December, alleging the North Carolina financing firm failed to obtain and close on a U.S. Housing and Urban Development-secured loan River House was seeking for the project.
The suit—which seeks unspecified millions of dollars in damages for breach of contract and negligence—claims that Grandbridge failed to obtain a $32.5 million HUD-guaranteed loan for the project, and as a result River House lost out on $8 million in New Market Tax Credits the Baton Rouge Redevelopment Authority had allocated for the project.
River House Partners, which last year secured conventional bank financing to move the project forward and broke ground last week, alleges it is spending $3 million more in construction costs and must pay higher costs for the financing it ultimately secured.
Grandbridge agreed to work on River House’s behalf for HUD-insured long-term financing for the project at below market rate in the summer of 2009. HUD ultimately retracted its “Firm Commitment” for the loan. Attorneys at Fishman Haygood, who are representing River House Partners, write that Grandbridge “proved itself to be utterly inept at the task of securing HUD-insured financing.”
But in a motion asking that the case be dismissed, attorneys for Grandbridge argue that the financing firm only stated that it was “willing to consider” a HUD-insured loan and that the company “never entered into a formal commitment to loan funds” to River House Partners. They also note that Grandbridge made no guarantees as to a specific outcome or timeline for the loan application.
Grandbridge’s lawyers also allege that River House’s decision to seek $8 million in tax credits to help finance the proposed project was a “new wrinkle” that caused “a seismic shift in the structure of the proposed financing specified in the application.”
The motion to dismiss is pending. River House will feature 224 luxury apartments within two four-story buildings, a 4,600-square-foot community clubhouse, 15,000 square feet of retail space and a 34,000-square-foot office building.
—Penny Font
