Wade Park Land Holdings, LLC v. Kalikow
| Decision Date | 04 March 2022 |
| Docket Number | 21-cv-1657 (LJL) |
| Parties | WADE PARK LAND HOLDINGS, LLC et al, Plaintiffs, v. JONATHAN KALIKOW et al, Defendants. |
| Court | U.S. District Court — Southern District of New York |
This case arises from the financing and development of two parcels of land outside Dallas, Texas, known as Wade Park. The case was originally filed as an adversary proceeding in the United States Bankruptcy Court for the Northern District of Georgia. The United States District Court for the Northern District of Georgia issued an order withdrawing the reference to the Bankruptcy Court and dismissed one of the defendants from the case. The case was then transferred to this Court.
Defendants Jonathan Kalikow (“Kalikow”), WP Development Partners, LLC (“WP Development Partners”), Gamma Lending Omega, LLC (“Gamma Lending Omega”), Gamma Real Estate Capital, LLC (“Gamma Real Estate Capital”), and GRE WP, LLC (“GRE WP”) (collectively, “Defendants”) move, pursuant to Federal Rules of Bankruptcy Procedure 7009 and 7012, which incorporate Federal Rules of Civil Procedure 9, 12(b)(1) and 12(b)(6) for adversary proceedings, to dismiss the complaint against them.[1] Dkt. No. 39.
Plaintiffs Wade Park Land, LLC (“WP Land”), Wade Park Land Holdings, LLC (“WPL Holdings”), and Thomas Family Trust (or “Trust”) (collectively “Plaintiffs”) bring seventeen claims against Defendants in the operative first amended complaint. Dkt. No 5. Plaintiffs allege that a temporary bridge loan from one of the Defendants devolved into a fraudulent scheme by Defendants to take control of Wade Park. Id. ¶¶ 1-6.
For the following reasons, the motion to dismiss is granted.
The Court accepts as true the well-pleaded allegations of the first amended complaint (“Complaint” or “Compl.”), Dkt. No. 5, along with the documents which are incorporated by reference or of which the Court may take judicial notice. See Gray v. Wesco Aircraft Holdings, Inc., 454 F.Supp.3d 366, 382-83 (S.D.N.Y. 2020), aff'd, 847 Fed.Appx. 35 (2d Cir. 2021).
I. The Relevant Parties Plaintiffs WP Land and WPL Holdings are each limited liability companies formed under the laws of Delaware with principal places of business in Newnan, Georgia. Compl. ¶¶ 7-8. Each was formed to hold title to a portion of the Wade Park development project located in Frisco Texas, outside of Dallas, Texas, with WP Land holding title to the southern parcel of land and WPL Holdings holding title to the northern parcel of land. Id. Each is a debtor in the related bankruptcy case. Id. The remaining plaintiff, Thomas Family Trust, is an irrevocable trust created under the laws of Georgia and holds a membership interest in Wade Park Ventures, LLC (“WP Ventures”). Id. ¶ 9. WP Ventures is a limited liability company that holds WP Land and WPL Holdings. Id. ¶ 28.
Plaintiff WP Land was managed by Stanley Thomas (“Thomas”) a commercial real-estate developer based in Newnan, Georgia who specializes in the development of high-end retail and mixed-use commercial and residential centers. Id. ¶¶ 25, 25.5. Thomas also managed WP Ventures, Lebanon 390WR, LLC (“Lebanon 390WR”), and various other entities involved in the Wade Park project. Id. ¶ 25.5.
Defendants WP Development Partners, Gamma Lending Omega, Gamma Real Estate Capital, and GRE WP are each limited liability companies formed under the laws of Delaware with principal places of business in New York. Id. ¶¶ 11-14. The Complaint refers to these four defendants collectively as the “Gamma Defendants.” Id. at 6 n.2. Defendant Kalikow was an officer of each of the defendant entities and is alleged to have directed their actions. Id. ¶ 10.
II. The Wade Park Project and the Loans from Bridge Capital and BAMCAP
The allegations in this case involve the financing for the Wade Park project. The Wade Park project is located at the “$5 Billion Mile, ” a one-mile stretch of land in Frisco, Texas that is home to The Star (the headquarters and training center for the NFL's Dallas Cowboys), Toyota Stadium, and various high-end, mixed-use developments such as Frisco Station and The Gate. Id. ¶¶ 32-33. The Wade Park project was contemplated to involve the construction of two office towers (with over five million square feet of office space), one million square feet of high-end retail space, approximately 2, 400 luxury residential housing units, and five hotels. Id. ¶ 35.
Between 2012 and 2015, various entities associated with Thomas acquired the approximately 176 acres of land that would become Wade Park. Id. ¶ 37. The acquisitions were financed through funds held by the Thomas Family Trust, entities affiliated with Thomas, and purchase mortgages from Bridge Capital, LLC (“Bridge Capital”) and BAMCAP Partners, LP (“BAMCAP”). Id. ¶¶ 30-31, 37. The acquisition of the northern parcel was financed by Bridge Capital through Lebanon 390WR, an entity managed by Thomas that was the predecessor in title to WPL Holdings. Id. ¶ 29-30. The acquisition of the southern parcel was financed by BAMCAP through two loans totaling $48 million (the “BAMCAP Loans”); title to this parcel was held by WP Land. Id. ¶¶ 31, 38. By the end of 2013, Thomas had engaged in pre-development work for the Wade Park project, overseen the development of architectural and other plans for the site, and begun efforts to lease commercial space on the northern parcel. Id. ¶¶ 39-41.
By the spring of 2016, Lebanon 390WR owed approximately $45 million to Bridge Capital for the loan used to acquire and construct the north property, and WP Land owed approximately $48 million to BAMCAP for the loan used to acquire and construct the south property. Id. ¶ 43. Both sets of loans were set to mature in early 2017. Id. ¶ 44. During this time, Thomas sought additional financing for the project from other financial institutions (such as JP Morgan, USAA, and others), which engaged in due diligence and considered whether to provide large-scale loans and equity investments that would finance construction and pay off the existing loans from Bridge Capital and BAMCAP. Id. ¶¶ 44-46. Bridge Capital, however, told Thomas that it could not continue to extend the maturity date of its loans. Id. ¶ 46. As a result, Thomas looked to obtain a bridge loan to pay back Bridge Capital and to provide construction financing for a limited period of time while the other financial institutions completed their due diligence. Id.
III. Negotiating the Gamma Bridge Loan
Thomas met defendants Kalikow and Gamma Real Estate Capital in or around October 2016, after having been introduced by non-party John Porter (“Porter”), an executive with the commercial real-estate firm CBRE Group, Inc. Id. ¶¶ 27, 48-49. After the October 2016 meeting, Thomas decided to move forward with a bridge loan from Gamma Real Estate Capital. Id. ¶ 55. On or about October 20, 2016, Thomas and Gamma Real Estate Capital executed a term sheet stating that Gamma Real Estate Capital would lend a Thomas-affiliated entity a total of just over $196 million for Wade Park (the “Gamma Bridge Loan”). Id. ¶ 57. The term sheet envisioned an initial six-month loan term, along with four six-month extension rights that Thomas could trigger so long as the loan remained current and out of default. Id. ¶ 58. The term sheet envisioned a quick closing-sometime in November 2016. Id. ¶ 57.
In late November 2016, before the loan was made, Kalikow and Gamma Real Estate Capital changed the loan terms, reducing the amount Gamma Real Estate Capital was willing to loan from $196 million to $139 million. Id. ¶ 63. In addition, Kalikow demanded that, in exchange for the loan, Gamma Real Estate Capital be given a second lien on the south Wade Park property behind BAMCAP and that BAMCAP enter into an intercreditor agreement that would cross-collateralize and cross-default the BAMCAP Loans on the south property with the Gamma Bridge Loan. Id. ¶ 64. At the time, a month had passed since execution of the term sheet, and the Bridge Capital loan was about to mature again; Thomas wanted to avoid having to obtain-and pay another very large fee for-a further extension of that loan. Id. ¶ 66. In addition, the Wade Park project required an enormous financial investment from Thomas or Thomas-affiliated entities. Id. ¶ 67. Given indications from Kalikow and Gamma Real Estate Capital that due diligence was going well, Thomas had stopped discussions with other potential bridge lenders. Id. ¶ 66. Thomas accepted Kalikow's and Gamma Real Estate Capital's changed deal terms. Id. ¶ 69.
On or around December 2, 2016, Kalikow and Gamma Real Estate Capital demanded two additional changes before they provided a loan: (1) a further reduction of the loan amount to approximately $83 million; and (2) a proposal that Kalikow called “The Hammer.” Id. ¶ 70. The Hammer is described in greater detail later in this Opinion. But, in essence, The Hammer gave Kalikow and the Gamma Defendants a 75% interest in the Wade Park project through WP Ventures and provided they would retain that interest unless the Gamma Bridge Loan was repaid within sixty days of its maturity date. Id. ¶¶ 72-73. It thus provided additional security for the loan. Kalikow explained that they wanted an interest in Wade Park that was large enough and “painful enough” to deter Thomas from filing for bankruptcy. Id. ¶ 74. In response to concerns from Thomas and his team members about these changes, Kalikow provided assurances in a No. of phone conversations on or about December 2, 2016 that he and Gamma Real Estate Capital did not want to own the Wade Park project. Id. ¶ 75. As to the reduced loan amount, while the original loan amount would have been sufficient for Thomas to repay Bridge Capital and to fund ongoing construction during the...
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