By ERIC HERMANN
Daily News Business Writer
February 08, 2002
The partnership that owns the General Motors building exploded in rancor
yesterday, as Donald Trump filed a $1 billion lawsuit against Conseco for
allegedly blocking his attempt to buy them out.
The suit casts a cloud over the future of one of Manhattan's glitziest
office buildings. Last summer, Conseco agreed to sell Trump its 50% interest
for $295 million.
"They indicated that they would do it, but as time went on, they just put
more conditions which were not in the original deal," said George Ross,
senior vice president of the Trump Organization. "Their position kept
getting more and more difficult."
A Conseco official said the suit was groundless.
"It's silly. I haven't seen such a rant since my daughter was two," said
spokesman Mark Lubbers.
If Trump loses, he might have to sell Conseco his 50% stake in the GM
building for just $15 million. The reason is that Trump initially put up
little cash, but agreed to manage and market it.
At that time, in 1998, Trump paired up with Conseco to buy the building for
a whopping $800 million. Located at Fifth Avenue and E. 59th Street, the
50-story tower commands views of Central Park and has a roster of blue-chip
office tenants like Estee Lauder and law firm Weil, Gotshal. Its groundfloor
is home to CBS' 'The Early Show' and toy store FAO Schwarz.
"It's one of the top five institutional buildings in New York," said M.
Myers Mermel of Tenantwise.
Last summer's sale pact provided Conseco with a much desired quick-exit
strategy as it struggled under a mountain of debt.
But Ross said Conseco made it impossible for Trump to complete the purchase
of its share.
Under the buyout agreement, Ross said, Trump agreed to pay Conseco $50
million in cash and provide a $200 million loan backed by Deutsche Bank —
plus $45 million to be paid later. Trump planned to finance his purchase by
borrowing $950 million from Deutsche, paying off the existing mortgage in
the process and winding up owning 100% of the GM building.
But the deal fell apart when Conseco demanded Trump finance it differently.
After Sept. 11, Trump could no longer find financing at an attractive rate,
"Sept. 11 had a horrendous effect on the financing of any trophy property in
the city of New York," he said.
The agreement between Trump and Conseco has a clause, under which either
partner can name a price for its share at any time. The other partner then
has to pay the named price for the other 50%, or agree to be bought out for
Last month, Conseco demanded to be bought out for $500 million — nearly
double what it had agreed to sell its share for last summer.
Lubbers added that under the partnership agreement, all disputes had to be
submitted to arbitration, not a court.
"I can only surmise that this lawsuit is being pursued for its entertainment
value, and I think it's a shame to waste the court's time," he said.
Original Publication Date: 02/08/02
© 2002 Daily News, L.P.