Serenity Pow! Lawsuit Wallops Once-Serenely Confident Setai Condo

On Oct. 25, 2007, in a typically optimistic New York Sun column entitled, “All Signs Pointing Up in Downtown Manhattan,”

On Oct. 25, 2007, in a typically optimistic New York Sun column entitled, “All Signs Pointing Up in Downtown Manhattan,” Michael Stoler used the Setai at 40 Broad Street as one of many examples of the florescence of Lower Manhattan.

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Josh Zamir, son of 40 Broad developer Asher Roshan Zamir, told Mr. Stoler that a condo buyer had agreed to the highest price ever for a Financial District condo, in this case the project’s penthouse: $1,800 a square foot! (The younger Zamir is no longer involved in the Setai project.)

Now, two years later, developers of the project-–whose Web site describes it as “a mantra of serenity and calm”–-are locked in an internecine battle over, well, money.

The plaintiff in the case is the DelShah Group, of which Michael Shah is a principal. The Oct. 15 suit names as defendants Zamir Equities, Asher Roshan Zamir (a principal in Zamir Equities), Atit Javeri (director of investment at Zamir Equities), and Anglo Irish Bank,  Bank Leumi and Commerce Bank. The latter three provided the $150 million first loan for the project.

According to Mr. Shah, on March 29, 2007, during the glory days of real estate excess in New York City, his group invested $4.185 million into the spa-condo development. Mr. Shah alleges that only later did he discover that, “the Construction Budget provided by the Zamir Entities and Defendant Javeri was false, inaccurate and misleading, as there were significant cost overruns for the Project.”

“[T]he Zamir Entities allowed the construction of the Project to exceed the construction budget by nearly $24 million,” reads the suit. “In addition, the Zamir Entities allowed the construction of the Project to be delayed.”

Not only does the suit allege construction overruns, but it also contends that in order to meet the stipulation that at least one condo purchase close by June 2008 (otherwise other would-be condo owners would have the right to rescind their contracts) Zamir contrived a “sham” closing, selling a unit to “a person or entity affiliated with with Defendants.”

“[D]ue to this contrived closing, multiple lawsuits have been filed against the Owning LLCs, which has forced them to incur legal costs and attorneys’ fees to defend same.”

Even juicier! The suit alleges that Zamir Entities “diverted millions of dollars from the construction of the Project to the build-out” of a restaurant on the ground floor leased to Zamir. Now, Mr. Shah wants justice, in the form of punitive damages, attorneys fees, and the like.

Zamir Equities issued the following statement via email:

“As a result of the pending litigation, it would be inappropriate for us to comment on the lawsuit brought by the Delshah Group or to attempt to repudiate their allegations in the court of public opinion. We look forward to establishing the facts in the matter at trial, and we are confident that such facts will corroborate our actions and dealings with respect to the Delshah Group.”

This is not the only legal complaint entangling 40 Broad, or, for that matter, the Zamir family. On Aug. 11, Pace Advertising sued Zamir Equities and 40 Broad LLC for nearly $300,000 in back payments. An attorney for Pace reached last week said that Zamir had begun repaying the firm.

And over at 14 Wall Street, a building owned by Capstone Equities, in which Mr. Zamir’s son Josh is a principal, architecture powerhouse Skidmore, Owings & Merrill has filed a lawsuit alleging that the landlord owes well over $1 million in unpaid tenant improvement allowances. The lawsuit was first reported in The Real Deal.

The Zamirs got into real estate after amassing a fortune in the diamond business, according to a 2004 profile in Real Estate Weekly. During the real estate heyday, the Zamirs invested in a number of properties with Kent Swig, who has himself been something of a casualty of the shattered real estate boom.

More from Dana Rubinstein:

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Serenity Pow! Lawsuit Wallops Once-Serenely Confident Setai Condo