MANHATTAN (CN) – Bear Stearns breached contract by letting JP Morgan Chase buy its $1.1 billion headquarters on Madison Avenue as part of the merger that rescued the distressed investment bank, the property owner says. Plaintiff 383 Madison LLC claims it has rights of first refusal on the building, which sits on land it leased to Chase for 99 years.
The plaintiff says it leased the land at 383 Madison Avenue, between 46th and 47th Streets, to Bear Stearns in 1997 for 99 years. The contract stipulates that Bear Stearns must give the LLC first shot at buying the building, and give it 45 days to consider any offer, the complaint states.
Bear Stearns built a new world headquarters on the site, and occupied it in 2003. The building is appraised at $1.1 billion, the LLC says.
The merger that rescued Bear Stearns from insolvency “did not provide for a cash break up fee,” the complaint states. “Instead, Section 6.11 provides that is the merger is not consummated, JPMorgan has the right to purchase the building for $1.1 billion.”
After quoting Section 6.11 at length, the complaint continues, “Bear Stearns must have recognized that there was a substantial possibility that the merger would not be consummated – thereby triggering the Asset Option – but nonetheless agreed to the Asset Option. Bear Stearns never undertook any steps to comply with its obligations under the Right of First Offer. Pursuant to Article 16 of the Ground Lease, Bear Stearns was obligated, ‘prior to making any offer to any third party to sell,’ not only to ‘give Landlord written notice (the “Sale Notice”) of its intention so to sell and specifying in detail the material business terms on which Tenant would be prepared to consummate such sale,’ but also to ‘negotiate in good faith with Landlord on an exclusive basis and consider, in good faith, any offer made by Landlord with respect to such sale.’ Bear Stearns wholly failed to fulfill these obligations.”
The LLC demands damages for anticipatory breach of contract and tortious interference. It demands costs and the right to buy the building for $1.1 billion. It is represented in New York County Court by Peter Calamari and Brendan Snodgrass with Quinn Emanuel Urquhart.