The Dayton’s Project Developer Sues New York Financier for Attempting to Push It Out
The owners of Dayton Project on Nicollet Mall have sued one of its financiers, Monarch Alternative Capital LP. The owners, 601 Minnesota Mezz LLC, allege that the financier is attempting to take over the $350 million building project through a “predatory ‘loan-to-own’ scheme.” During the pandemic, Monarch purchased a mezzanine loan for the project at a discount and held the project to extremely high and unrealistic standards of leasing during the pandemic and racial justice movement. Monarch has said that although 601 Minnesota Mezz is current on its debt service obligations, due to COVID-19, Mezz is technically in default and therefore subject to additional penalties. While the project was nearly finished in February 2020, the former Dayton’s building did not reopen until September 2021. It was difficult to get tenants, many were backing out or deferring leases during COVID. Finally, in March 2021, Ernst & Young signed a lease for 30,536 square feet of the massive 1.2 million-square-foot structure. 601 Minnesota Mezz is requesting injunctive relief to stop Monarch from trying to push it out of business and take over the project itself. Additionally, Mezz wants damages against the financier. A ruling in favor of 601 Minnesota Mezz is necessary to continue to grow local Minnesota real estate developers’ businesses.