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Eklecco’s Defenses Rejected By New York County Supreme Court; Referee To Tally Damages In Anticipation Of Foreclosure Judgment And Possible Sale
Owners of the Palisades Center, along with guarantors of the $418.5 million mortgage loan on the real estate, lost a battle in New York County Supreme Court that moved the likelihood of a sale of the mall one step closer.
On Wednesday, New York State Supreme Court Justice Francis Kahn, III, rejected Eklecco’s last line of defense, largely based on technical arguments about whether Wilmington Trust had standing to foreclose on the loan as it was not the original lender and had not yet shown adequate proof that it was the proper party to bring the foreclosure action.
The $418.5 million loan to Eklecco originated from JP Morgan Chase and Barclays’ Bank in April 2016. Two times during the COVID pandemic, a “standstill agreement” was executed – essentially a pause on repayment – wherein Eklecco acknowledged that Wilmington Trust was the then-owner of the debt, and that Eklecco had no defenses against repayment.
In October, 2022 Wilmington and Eklecco entered into a forbearance agreement where Eklecco again acknowledged the debt was owed to Wilmington and that it had defaulted in repayment.
Despite these admissions, when the foreclosure action was filed in February 2023, Eklecco challenged Wilmington’s standing to sue. Last April, the Court sided with Eklecco, saying that Wilmington failed to proffer sufficient proof of its right to sue. However, on a second bite at the apple, Wilmington cured its proof issue, and satisfied the Court with affidavits and documentary proof that it had the right to initiate the action and foreclose on the property.
In September 2024, the litigants entered into a Stipulation resulting in the Court appointment of temporary receiver Chris Neilson to oversee the operations and finances of the Palisades Center. Neilson is managing partner of Trigild IVL, LLC, a national real estate company that has handled thousands of court-appointed receiverships for commercial properties nationwide. Neilson hired lawyers, property managers, and real estate brokers to assist him with leasing retail space, collect rents, pay bills, conduct routine maintenance and repairs, as needed.
This week, the Court granted Wilmington’s Motion For Summary Judgment, and for a default judgment against other defendants who did not defend the case. The Court appointed Roberta Ashkin, Esq., as a Referee. Under New York law, a Referee has the power to compute the amount due to Wilmington and examine and report to the parties and the Court if the real estate can be sold off in parcels to satisfy the underlying debt.
The next step for Wilmington is to provide documents to the referee by May 9th and promptly respond to the Referee’s inquiries. Once a report is prepared, it can be challenged by either party, but if Wilmington is going to seek a foreclosure judgment and force a sale, it must do so within 45 days of the Referee’s report. The Court set a follow-up hearing for August 6th.
Wilmington is seeking foreclosure of five parcels of property, one of which is held as “fee simple,” and four others in which Eklecco has leasehold interests. The indoor shopping mall, constructed in 1998, is about 2.2 million square feet.
Although the property is located in Rockland County, the parties agreed that the suit would be heard in New York County.
Eklecco Defaults On Destiny-USA $300 Million Loan
Eklecco and the Pyramid Company recently failed to secure an extension on a $300 million loan on the Destiny-USA Shopping Center in Syracuse, NY triggering a default and withdrawal of a forbearance agreement with its lender. Destiny is the largest indoor shopping center in New York.
Destiny-USA’s owners obtained the $300 million loan from JP Morgan Chase Bank in 2014 as part of the redevelopment and expansion of the Carousel Center mall (which was renamed to Destiny USA). The loan was transferred to Wilmington Trust in 2019, which now has the option to foreclose on that property.
Destiny-USA boasts 2.4 million square feet of retail space and is the largest shopping center in New York. The second largest is Roosevelt Field (2.37 million square feet) in Long Island and third is the Palisades Center (2.2 million square feet) in West Nyack.
Last summer, the Town of Clarkstown had agreed to refund the owners of the Palisades Center $27.5 million in property taxes paid to the town, the Clarkstown school district and Rockland County over a four-year period to settle several years of tax certiorari cases pending in Rockland County Supreme Court.
The Palisades Center had set the market value at around $155 million while the town’s most recent value for the mall was $578 million. Under the settlement, the tax assessment is now based on a value of $300 million, far less than the underlying debt due in the foreclosure action.
Interest has been accruing on the $418.5 million loan. A sale of the Palisades Center would likely be for far less than the amount owed Wilmington, resulting in a deficiency judgment against Eklecco and its loan guarantors.
