A downtown White Plains landlord has lost two office buildings to a special loan servicer, but not before a corporate tenant sued the owner over noisy, office-and-employee-rattling business disruptions caused by weightlifters and exercise buffs.
The disgruntled tenant, Webster Bank NA, wants a judge to order a full refund of its rent payments since a fitness center opened above its Westchester business banking office more than two years ago. And, having relinquished the property this spring, the bank”™s former landlord wants its defendant”™s role and responsibility in the lawsuit handed over to the new owner of White Plains Plaza.
In default on an $80 million mortgage loan, White Plains Plaza Realty LLC, an affiliate of Westport-based Heyman Properties LLC, last month deeded its 1 N. Broadway and 445 Hamilton Ave. buildings to an entity of C-III Capital Partners in Irving, Texas, and C-III”™s special servicer division handling commercial mortgage-backed securities. The Heyman company had owned the Class A office complex since 2005, when it paid $60 million to acquire it from Metropolitan Life Insurance Co.
- Webster Bank has sued its former landlord at 1 N. Broadway in White Plains for leasing space to Crunch Fitness, where noisy workouts allegedly have disrupted banking business below it. Photo by John Golden
The recent deal for the two Central Business District buildings, which total approximately 712,000 square feet of space, resolved the special servicer”™s foreclosure proceeding against the realty company for its $80 million loan from Deutsche Bank Mortgage Capital in 2006. The loan was sold and bundled in a commercial mortgage-backed securities (CMBS) offering for investors.
The White Plains Plaza loan in 2013 attracted the notice of researchers at Trepp, the commercial real estate and CMBS data and analytics company in Manhattan, when the Jackson Lewis law firm, a leading tenant at 1 N. Broadway, signed a long-term lease at the nearby Westchester One office building at 44 S. Broadway and vacated its White Plains Plaza space. A Trepp researcher said the loan was resolved with a $28.1 million loss to investors.
As C-III Asset Management late last year began working out a deed transfer deal with the White Plains Plaza landlord in lieu of foreclosure, attorneys for Webster Bank filed a lawsuit in state Supreme Court in White Plains claiming the landlord had breached its lease agreement by depriving the bank of its contractual right to “quiet enjoyment” of its office space.
Based in Waterbury, Conn., Webster Bank in late 2010 opened its New York regional headquarters at 1 N. Broadway, where it signed a seven-year lease for a 6,000-square-foot ground-floor office prominently located at the bustling downtown corner of Main Street and North Broadway. The space had previously been occupied by the less sedentary operations of New York Sports Club.
The quiet and joy fled Webster”™s corner office in February 2013, according to the bank”™s lawsuit, when a new tenant and apparent successor to New York Sports Club, Fitness Holdings LLC, opened a Crunch Fitness center directly above the bank space.
“Beginning immediately, extremely loud and disruptive noises, emanating from Crunch, permeated the plaintiff”™s office space,” attorneys at Dorf & Nelson LLP said in the court complaint. Bankers found themselves trying to do business accompanied by “sounds from dropping weights.”
“The sounds from dropping weights created loud booms in plaintiff”™s open space that, among other things, shook their exterior windows, dislodged their glass doors from their hinges, popped sprinkler caps off sprinkler heads in their ceiling, rattled their ceiling tiles, and caused plaintiff”™s employees and clients to duck and recoil.”
Crunch”™s pumping-iron enthusiasts were not the only noisemakers overhead. The downstairs tenant also complained of “amplified music, the amplified voices of exercise instructors and the rapidly repetitive thud of participants”™ jumping and moving in group exercise classes.” The bank”™s quiet professional space was further disrupted by “the constant grinding sound of large exercise machines.” The gym workouts have caused the bank to lose business and revenue, attorneys claimed.
Attorneys said the noise continues unabated through banking hours and has made areas of the Webster office “uninhabitable and completely unusable.”
The noise-challenged tenant sought a court judgment granting the bank a refund of all paid rent since Crunch opened its doors, a full abatement of rent due until the lease expires in 2017, and additional money damages of no less than $2 million.
As an alternative solution, attorneys asked for a court judgment that would terminate the lease without penalty to the bank tenant and have Webster Bank move within the building to an office “of equal size and quality” at least two floors above Crunch at no expense to the quiet-seeking tenant.
Supreme Court Justice Charles D. Wood in late May dismissed the bank attorneys”™ claim that the landlord fraudulently induced the bank to lease space by concealing that it planned to lease other areas of the building for non-office use. The judge also dismissed a claim for $3 million in punitive damages.
Wood denied the defendant”™s motion to dismiss all claims against the former landlord.
Since the judge”™s decision, the defendant”™s attorney, Mona D. Shapiro, has filed a new motion to dismiss the case against White Plains Realty and substitute the new owner as defendant in the action. She argued that the bank”™s lease limits any claim for damages by Webster to White Plains Plaza”™s equity interest in the property and relieves the realty company of any obligation with respect to the lease when the building is transferred to a new owner.
A spokeswoman for Webster Bank said it is the bank’s policy not to comment on unresolved legal issues. White Plains Plaza Realty could not be reached for comment.
