REAL ESTATE WEEKLY

40 Wall Street sale
subject of litigation

By LOIS WEISS

The end result of the 40 Wall auction was a surprise to various parties and one of them is now suing the owner of the land.

The Wong family, unsuccessful bidders who ran the auction price up before bowing to Citicorp at $10.8 million, is now suing fee owner J. Walter Hinneberg for specific performance of a sales agreement for the fee they say was negotiated prior to the auction.

During the foreclosure auction, the lender, which had agreed to bid up to its mortgage of $79 million and transfer the property to Kinson Properties, headed by Yick-en Hui, watched in disbelief as another Chinese family, the Wongs, kept upping the ante. Citibank had previously negotiated with the Wongs.

Recalled Earle R. Tockman, the attorney who represented Kinson Properties who had worked out a side deal with Citibank at a set price prior to the auction, It was clear to us that the other buyer had negotiated with Citicorp and had agreed to a bidding structure contract and thought we did too.

But Tockman, a partner in the Downtown law firm of Tockman & Feffer, had insisted on a firm deal at a set price of around $7 million, despite Citibank initially offering terms that included a split the difference clause. Our legal work was excellent, he noted. We correctly guessed the time frame. Our strategy was that we were there when they needed a buyer.

Citibank needed a firm buyer quickly because the fee holder, J. Walter Hinneberg, had the court's permission to foreclose on the prime lease. A clause in that document states the mortgagee must expend funds to keep the building up as a first class property.

Citibank had already cut off funds for a renovation being conducted by the Resnick Organization after they purchased the property for $77 million at an auction of the then Marcos holding. The Marcos had purchased the 70-story tower for $70 million in 1982. Resnick was forced to default on its obligation to Citibank leading to the most recent auction.

Kinson also has ambitious plans to renovate the property and was undaunted by the lease requirements or the payments of $1.5 million per year until 2010 when they will be renegotiated. The lease runs until 2059.

In the middle of the auction, continued Tockman, One of (Wong's) bidders came over and said, We have a bidding contract to buy the fee. We're going to be your landlords. Then Citicorp came over and said We'll buy you out of your contract with us. Tockman's clients didn't flinch.

Citibank ultimately won the lease hold at $10.8 million and made arrangements to transfer it to Kinson, a U.S. subsidiary of Ocean Voice Industries of Hong Kong, which has pledged to put $25 million into renovations that are sorely needed.

After the auction, however, the Wongs brought a lawsuit against Hinneberg for specific performance to compel him to transfer the fee. But the Wongs never had a contract to buy the land, merely a letter agreement.

"They did that to scare us off," said Tockman.

The referee still had to assign the lease to Kinson at a formal closing. The day before closing the Wongs filed a lis pendens which basically notified interested parties that there was an action pending against the property which could cloud the title.

Everybody thought we wouldn't go through with the deal, noted Tockman. I said, its a question of tactics.

Wong attorneys had no comment but confirmed the lis pendens filing. Hinneberg's attorney did not return phone calls.

REAL ESTATE WEEKLY
July 4, 1993