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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