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Patriot Bank seeks to foreclose on Wall Street Theater loan

Patriot Bank and The Wall Street Theater are duking it out in court over a $3 million “permanent loan.”

Patriot, in a July filing, seeks to foreclose on an $8.8 million loan the bank says the nonprofit has defaulted on. Wall Street, in filings on that case and in a lawsuit filed in June, states that Patriot purposefully made loans to the theater knowing they couldn’t be repaid. Patriot refinanced the $3 million loan to make it $8.8 million, according to Wall Street, which alleges Patriot made false statements in “intentional” and “negligent” misrepresentations.

Although the theater cites an agreement for it to pay $3,500 a month beginning in October, Patriot states that the theater was expected to pay more than $9,000 a month but stopped in October.

State and Federal tax credits supported the renovation of the former Globe Theater into The Wall Street Theater, which opened in 2017. A $1.7 million HUD (U.S. Department of Housing and Urban Development) Section 108 loan to the theater was held up by the Common Council in 2017 due to liens on the property, then-Planning Committee Chairman John Kydes (D-District C) said. The theater was going through a Chapter 11 bankruptcy over a dispute with a contractor and emerged from bankruptcy in January 2019 “after successfully implementing its plan of reorganization,” according to Westfair Business Journal.

According to Attorney Jeffery Sklarz, who represented the theater in the bankruptcy, the theater’s corporate organizational structure consists of:

  • Wall Street Theater Company, Inc., a nonprofit
  • Wall Street Master Tenant, a Connecticut Limited Liability Company (LLC)
  • Wall Street Master Landlord, a Connecticut Limited Liability Company (LLC)
  • Wall Street Managing Member, a Connecticut Limited Liability Company (LLC)
  • Wall Street Manager, a Connecticut Limited Liability Company (LLC)

Patriot, in its July 24 foreclosure filing, named all of the above as well as the State Department of Economic and Community Development (DECD). Wall Street Theater Company, Inc. actually owns the property, it stated.

Wall Street Theater Company, Inc. is the only plaintiff in the June 30 complaint against Patriot. The bank states that the complaint was filed after the notice of default and before the actual foreclosure.

Wall Street Theater Company, Inc. alleges in its June lawsuit that in 2016 Patriot refinanced the $3 million permanent loan to increase the principal owed to $8.8 million, never seeking State approval for the “secreted” actions. Patriot “knew the value to support the loan it was making did not exist” and promised to “create a new loan structure after the refinance” for a permanent $3 million loan.

In 2021, Patriot told WST that its Board of Directors had agreed to a permanent recast of the loan at a lower amount, the theater company alleges. WST relied on this promise in agreeing to a post-COVID temporary payment plan.

But Patriot “took out” more funds than agreed to and claimed it was for “tax escrow,” although the theater doesn’t have a tax escrow arrangement with Patriot, WST alleges. The funds remain unaccounted for, according to WST, which doesn’t name a dollar amount.

In October, Patriot offered permanent financing obligating Wall Street Theater Company to pay $3,500 a month, according to the theater company’s complaint, which alleges Patriot withdrew that amount monthly until February, when it unexpectedly stopped.

This year, the Wall Street Theater Company made two offers to settle the loan, one for $2.9 million and one for $3.5 million, but Patriot refused both, the company states in its complaint.

Patriot has interfered with WST’s business, by, for example, “creating a significant capital deficit stymying all fund-raising efforts,” the complaint states. It also told competitors that the “theater was in dire financial straits, even going as far as providing an in­ person tour of the theater to a competitor to see if there was any interest in purchasing the theater.”

Patriot also marketed the theater through a real estate firm, the complaint states.

Wall Street Theater Company accuses Patriot of intentional misrepresentation, negligent misrepresentation, breach of contract, tortious interference and promissory estoppel. “Promissory estoppel is a legitimate principle that ensures a promise made is upheld by the law,” according to upcounsel.com.

Patriot, in its July 24 foreclosure filing, cites a 2019 loan for $8.8 million. Wall Street Master Landlord provided a security interest; Wall Street Managing Member and Wall Street Manager guaranteed the loan. Wall Street Managing Member pledged to Patriot “all right, title and interest in the Pledged Membership Interests and Collateral.”

The note was modified on June 20, 2020, on Sept. 25, 2020 and Jan. 1, 2022, Patriot states. The defendants agreed to pay $9,333 a month beginning Jan. 1, 2022 and then $10,333 a month beginning Feb. 1, 2023. The amount would increase to $12,533 on June 1.

The payments ceased to be made in October, according to Patriot.

DECD may claim an interest in the property but they would be subordinate to the mortgage, according to Patriot.

“This is a business dispute that is not relative to the ongoing operations of the non-profit,” Wall Street Theater Company President Suzanne Cahill said Monday in an email. “We have a full calendar of excellent theatrical performances extending well into next year.”

Updated 11:16 a.m., more information.

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Comments

6 responses to “Patriot Bank seeks to foreclose on Wall Street Theater loan”

  1. Bryan Meek

    This is what happens when government gets involved in subsidizing things.

    The tenants have no incentive to run it like a real business and eventually go out of business.

    I can only imagine how much free covid money they squandered as well,

    Remember when prior operators used to get real name acts down there without having photo op ribbon cutting politicians glad handing them free tax dollars?

    To their defense since the city has totally mangled the POKO project no one without subsidy could possibly survive there.

    I’m sure some believe that more government is the solution.

    Maybe the Tourism’s director’s new assistant needs another assistant?

  2. Tysen Canevari

    Just curious: Did the poor contractor ever get paid that did all the renovation work?

  3. Tod BryANT

    The Wall Street Theater is the heart of the Wall Street Neighborhood. It is a huge asset to the city and our only relatively large live entertainment venue. It has been an uphill battle for the management to bring the place to its current level. They book acts for a variety of audiences and bring business to the surrounding bars and restaurants, Booking and managing these acts is not easy, but they have learned the business. In my opinion, part of the issue is that the Norwalk business community has not stepped up with the sponsorships that small theaters like this need to survive. The Norwalk community should support this theater in every possible way. Think about what the street was before it opened and what might replace it.

    1. Bryan Meek

      The Globe theater did just fine without subsidy and used to draw real acts. I remember seeing the GoGos, David Lee Roth, other quality name acts. POKO sitting there for 9 years with no end in sight isn’t helping. Hopefully the mechanics liens were secured before the mortgage. Not that I want to see Patriot get stiffed, but they understood the risks.

      1. I understand your position on tax subsidy and won’t dispute that there is waste, but to point to The Globe has how a successful venue was once run without city/state aid seems absurd, since that venue eventually failed.

        It is my understanding that every incarnation of that theater as a venue, and there were a few, did also fail. In part because of the size (less than 1000) do not equal the amount of ticket sales to support the bigger name acts, whose guarantees will generally exceed what the theater can draw. So many shows lose money, even ones that the public sees as successful. It may well be the Globe took a huge financial hit for the GoGos show. Who knows? It was long since shuttered by the time I moved to Norwalk in 2011.

        Unfortunately, running a theater/music venue is a very complex endeavor, and extremely difficult to run as profit-based businesses. This is why they make more sense as non-profit based businesses.

        As non-profits they serve a greater good than selling tickets and struggling making a profit; they enrich the community, they bring people to the area who support other small businesses, they increase cultural tourism, and much more.

        These are the reasons to support them and we should do more to support them, as a community, and as the city and state, because of what having the theater operate does far more for us than it does for the people running it. To lose the Wall Street Theater now would be a disaster for the community.

        In closing, if the size of the theater is a problem financially it’s also one of its greatest assets in my opinion. Concert goers get a far more intimate experience seeing a band play at the Wall Street Theater with top quality sound and lighting, better than many larger concert venues.

        As someone who has mixed live sound for concerts in over 40 countries, the Wall Street Theater is a very special venue in my opinion, and one that is worth fighting for, instead of fighting over.

  4. Paul Lanning

    Won’t it hold 1,000 if the floor is standing room?

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