Lenders that took over a troubled Boston office building from Fortis Property Group are coming after the developer and its CEO Joel Kestenbaum for $83 million in outstanding debt.
Fortis allegedly defaulted on the $763 million senior loan that BDT & MSD Partners provided for One Lincoln Street, one of the city’s largest — and newest — office buildings. It also stopped making payments on the $145 mezzanine loan from DivcoWest, according to lawsuits filed by the lenders.
The lenders took back the building in March at a foreclosure auction. Now, in two separate lawsuits, they are suing to collect the interest on the monthly debt service payments Fortis failed to pay off at the January 2 maturity. DivcoWest is demanding $47 million and BDT & MSD $36 million.
The lawsuits allege that both Fortis and Kestenbaum guaranteed the debt. Specifically, the lenders claim they wouldn’t extend the credit unless they “unconditionally [guaranteed] the payment and performance,” adding that the guarantee was an “irrevocable, absolute, continuing guaranty of prompt payment and performance.”
When reached for comment, Fortis fired back at the lawsuits, calling them “a defensive, flailing ploy by these lenders to try to distract from the significant liability they face as a result of their own misconduct.”
The developer filed its own suit against the lenders in March, alleging they violated the loan agreement and a “good faith” arrangement over control of the office tower.
“We look forward to refuting the lenders’ meritless claims in court, vindicating Fortis’s rights and recovering the damages the lenders caused through their wrongful actions,” Fortis said in a statement.
Fortis bought the 36-story, 1.1 million-square-foot property in 2006 for $889 million. In 2022, the Brooklyn-based developer inked a $1 billion refinancing, one of the largest deals ever in Boston.
But the next year, Fortis lost anchor tenant State Street, which occupied 750,000 square feet and used to share its name with the building. One Lincoln struggled to land new leases, and the property is now less than half-occupied, according to MassLive.
The lenders took over the property with a $400 million bid, another example of Boston’s struggling office market.
These latest lawsuits add to Fortis’ growing list of legal woes, which include a long-running dispute with a lender over its infamous leaning tower in the Financial District. A judge gave Valley Bank the green light to foreclose on 161 Maiden Lane in 2023.
Fortis also narrowly avoided foreclosure at the former Long Island College Hospital site in Cobble Hill before selling the parcel and another at 350 Hicks to Madison Realty Capital in 2022.
In February, an investor sued the developer over allegations it lied about the value of assets at Olympia Dumbo, its marquee residential project in Brooklyn.
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