96 Wythe Acquisition Brings a Lawsuit for $20M Against Benefit Street Partners Realty
JAN 17, 2022 | REPUBLISHED BY LINY : APR 7, 2022
January 6, 2022, Southern District of New York – Plaintiff Debtor 96 Wythe Acquisition LLC, a boutique Williamsburg Hotel, initiates a lawsuit against Defendant Benefit Street Partners Realty Operating Partnership, LP to recover damages from Defendant for alleged breach of contract, breach of its implied duty of good faith and fair dealing, unjust enrichment, and conversion of the Debtor’s property. The lawsuit also asserts an objection to the portion of Benefit Street’s claim relating to the continued accrual of interest allegedly at excessive rates, together with other charges asserted against the Debtor.
Specifically, the complaint alleges that Benefit Street improperly caused an additional 0.5% per annum in interest to be charged on loan and allegedly erroneously asserted the existence of defaults under the loan documents, which improperly created a compounding liability for 96 Wythe. The complaint also contends that Benefit Street deprived the Debtor of the benefit of its bargain by allegedly contriving defaults against the Debtor and refusing to adequately communicate to the Debtor amounts necessary to cure monetary defaults under the loan agreement. 96 Wythe further accuses Benefit Street of allegedly acting in a manner that prevented the Debtor from exercising its extension options under the loan agreement, refinancing its debt to the Benefit Street, or otherwise improving its capital structure.
Accordingly, the Debtor requests the Court for an order and judgment against Defendant for at least $20,000,000, plus interest.
The Debtor also seeks an order against Benefit Street disallowing its claim in its entirety until such time that it returns property of the estate that it has allegedly wrongfully retained. The complaint also adds that even upon returning such property, Defendant’s secured claim should be allowed in an amount that should not exceed $70.7 million and requests the Court to disallow the balance.
96 Wythe Acquisition LLC v. Benefit Street Partners Realty Operating Partnersh (22-07002), United States Bankruptcy Court, S.D. New York
Extracts from the Complaint re Williamsburg Hotel Funding and More about the Rogue Ex- Deutsche Bank Executives from 2008 era
The Debtor owns and operates the boutique Williamsburg Hotel (the “Hotel”) in Williamsburg, Brooklyn.
Through financing provided by a construction lender prior to the Lender (in addition to substantial equity financing and loans), the Debtor conceptualized, designed and constructed the Hotel from scratch, building it out into a boutique hotel accommodation in the heart of Brooklyn’s hip Williamsburg neighborhood.
Thomas Gahan
Chief Executive Officer
Tom Gahan is chief executive officer of Benefit Street Partners and is based in our New York office.
Prior to joining Providence and launching BSP in 2008, Mr. Gahan was chief executive officer of Deutsche Bank Securities Inc. and head of corporate and investment banking in the Americas. He was also the global head of capital markets at Deutsche Bank, chairman of the principal investment committee and a member of the global banking executive committee and the global markets executive committee.
Before joining Deutsche Bank, Mr. Gahan spent eleven years at Merrill Lynch, most recently as global head of credit trading within the fixed income division. Mr. Gahan received a Bachelor of Arts from Brown University.
Instead of allowing the Debtor to move forward with a refinancing of the Lender’s debt, as had always been contemplated, the Lender engaged in a course of misconduct designed to enrich itself while depriving the Debtor of the benefit of its bargain.
Richard Byrne
President
Richard Byrne is president of Benefit Street Partners and is based in our New York office. He is also the chairman and chief executive officer of Business Development Corporation of America and Benefit Street Partners Realty Trust, Inc.
Prior to joining BSP in 2013, Mr. Byrne was chief executive officer of Deutsche Bank Securities, Inc. He was also the global head of capital markets at Deutsche Bank as well as a member of the global banking executive committee and the global markets executive committee.
Before joining Deutsche Bank, Mr. Byrne was global co-head of the leveraged finance group and global head of credit research at Merrill Lynch. He was also a perennially top-ranked credit analyst. Mr. Byrne earned a Masters of Business Administration from the Kellogg School of Management at Northwestern University and a Bachelor of Arts from Binghamton University.
Mr. Byrne is a member of the board of directors of MFA Financial, Inc. and New York Road Runners.
Specifically, the Lender waged a campaign of abuse, and perpetrated a scheme through which it circumvented its obligations—in contravention of the Debtor’s rights under the Loan Agreement—by, among other things:
(i) improperly refusing to acknowledge the completion date of Hotel construction despite documents, reports and supporting information confirming that the Hotel was substantially completed within the terms of the Loan Agreement;
(ii) improperly increasing the interest rate;
(iii) improperly withholding Debtor funds;
(iii) improperly claiming the Debtor’s interest reserve was not sufficiently funded; and
(iv) as a result of and/or as a basis for the foregoing, fabricating serial defaults, which provided the Lender with an unfair advantage, leaving the Debtor with no option but to either succumb to the Lender’s improper demands to pay exorbitant and unauthorized interest and fees or jeopardize the entire Hotel project.
David Manlowe
Senior Managing Director
David Manlowe is chief operating officer and head of research for Benefit Street Partners. He is based in our New York office.
Prior to joining BSP in 2009, Mr. Manlowe was chief operating officer of global capital markets, chairman of the global banking equity investment committee and chairman of the global capital markets compensation committee at Deutsche Bank.
Mr. Manlowe also served as Americas head of company equity and credit research and Americas co-head of cash equities sales and trading while at Deutsche Bank.
Previously, Mr. Manlowe was an equity analyst at PaineWebber and NatWest. While an equity analyst, Mr. Manlowe received top rankings by several industry leading surveys, including being named a multi-year member of the Institutional Investor All-American Research Team.
Mr. Manlowe received a Master of Science from the University of California, Berkeley and a Bachelor of Science from the University of Washington, Seattle.
As explained more fully below, Lender has taken such unsubstantiated, false and/or bad faith actions in the administration of this loan.
The foregoing fabricated and false “defaults” and other claims by the Lender, and their corresponding adverse actions taken by Lender against the Borrower, have no basis then or now, and do not withstand scrutiny as explained below.
As a direct result of the Lender’s misconduct—whether expressly in violation of the Debtor’s contractual and property rights or in violation of the implied covenant of good faith and fair dealing—the Debtor has been forced to defend itself in a protracted foreclosure case and an interlocutory appeal of a favorable order and then file the above-captioned Chapter 11 bankruptcy case (the “Chapter 11 Case”).
Michael Paasche
Senior Managing Director
Michael Paasche is a senior managing director for Benefit Street Partners and is based in our New York office.
Prior to joining BSP in 2008, Mr. Paasche spent 13 years at Deutsche Bank. Most recently, he served as global head of leveraged finance and was also a member of the underwriting and investment banking management committees.
Mr. Paasche began his career with Prudential Securities, where he held various positions including managing director and head of high yield. Mr. Paasche received a Master of Business Administration from the University of Chicago and a Bachelor of Arts from Albion College.
Due to the Lender’s actions, and while facing the devastating effects of the COVID-19 pandemic, the Debtor’s ability to operate its business has been severely impaired and its other creditors’ ability to receive payments from the Debtor in the ordinary course of business has been restricted.
Franklin Templeton Buys Providence Equity’s Benefit Street Partners
OCT 25, 2018 | REPUBLISHED BY LINY : APR 7, 2022
Franklin is moving further into alternative investments, buying a credit manager founded by Deutsche Bank executives.
Franklin Templeton Investments has an agreement to buy $26 billion alternative credit manager Benefit Street Partners from private equity firm Providence Equity Partners, the firms announced Thursday.
The acquisition marks the latest in a series of moves by Franklin to offer alternative investments in addition to its traditional equity and fixed income funds. Alternative credit as an asset class exploded in the ten years after the financial crisis as banks stepped away from proprietary trading and lending. Institutional investors have since poured money into alternative credit, making it one of the hottest fund categories.
Thomas Gahan, the former CEO of Deutsche Bank Securities, founded Benefit Street in September 2008 as the credit investment arm of Providence Equity Partners, a private equity firm specializing in the communications, education, information, and media industries.
Gahan brought together the key people who turned Deutsche Bank into a powerful player in U.S. leveraged finance. Among others, Gahan recruited Richard Byrne, who had succeeded Gahan as CEO of Deutsche Bank Securities; Michael Paasche, who had been global head of leveraged finance at the bank; and David Manlowe, former chief operating officer and head of global capital markets at Deutsche.
Benefit Street offers private and opportunistic debt, structured credit, high yield, special situations, long-short liquid credit, and commercial real estate debt.
