The long-awaited Dayton's Project in downtown Minneapolis faces an uncertain future as a legal battle ensues behind the scenes.
The developer resurrecting the historic property has filed a lawsuit against Monarch Alternative Capital, a New York lender that recently stepped in to finance the project.
Filed this week, the suit says the company "wants to take over the 1902 gem" in a "predatory 'loan-to-own' scheme," according to a news release issued on behalf of the plaintiff and owner of the Dayton's site, 601 Minnesota Mezzanine LLC.
As the release notes, the $350 million refurbishment — which is designed to host retail stores, restaurants, a rooftop park, a library and more — has been "largely complete" since February 2020, when COVID-19 struck and essentially put the launch of the project on hold.
As a result of the pandemic and the civil unrest that followed the murder of George Floyd, “the Minneapolis leasing market has been virtually frozen," and the developer has been unable to fill the Dayton's space.
The release says that 601 Minnesota Mezzanine is in "technical default" because of this situation, even though the company is "completely current in its debt service obligations." Additionally, the suit says, Monarch Alternative Capital is holding the developer to "leasing hurdles [that] were set before anyone understood how severe and long lasting the dual crises impacting Minneapolis would be."
601 Minnesota Mezzanine is now facing "massive additional potential penalties" as a result, and it's alleging that Monarch is seeking to drive it out of business and "take over the project for itself.”
“By refusing to cooperate with 601 Minnesota in addressing the Leasing Hurdles, and instead trying to capitalize on the current crisis to foreclose the mezzanine loan and steal the Property," the filing says, "Monarch has ensured that no other lender will refinance the Dayton’s project.”
The lawsuit is seeking intervention from the court as well as $270 million in damages from Monarch.
BringMeTheNews has reached out to the New York lender for comment.