The owner of a large commercial property in Wilmington is responsible for a $7.4 million loan, after the Delaware Court of Chancery ruled Monday that the loan’s special servicer was under no obligation to renegotiate its terms.
Windsor I, which owns the 48,000 square foot property on Farrand Drive, had petitioned Chancellor Andre G. Bouchard to order the special servicer, CWCapital Asset Management, to the negotiating table under a 2015 pre-negotiating agreement, fearing that it was at risk of imminent default as the property’s only tenant, a Best Buy store, planned to switch locations after 20 years at the site.
The agreement, Windsor said in court filings, had “solidified the lender’s commitment” to rework the loan’s terms in light of Best Buy’s pending departure, and CWCapital should be barred from foreclosing on the property until the sides engaged in meaningful, good-faith negotiations.
CWCapital, however, moved to dismiss the complaint, calling Windsor’s assertions “an incredible characterization” of the agreement.
“There is simply no reading of the plain language of the [pre-negotiation agreement] that creates a duty to negotiate,” the Maryland-based firm said in a February filing.
In a letter to the parties, Bouchard said the agreement only established a framework for discussions regarding potential negotiations, and not a binding obligation under Maryland’s objective interpretation of contracts.
“Thus, when read as a whole, the pre-negotiation agreement is a document that simply establishes rules to govern any discussions that take place,” he said in the 12-page letter opinion. “It does not obligate any party to negotiate or forebear from exercising remedies otherwise available.”
The ruling was a blow for Windsor, which had desperately tried to renegotiate the loan before it matured on Jan. 1. According to court documents, Windsor offered to buy the loan for as much as $4 million in 2016, a 74 percent increase, it said, over the $2.3 million appraised value of the property.
But CWCapital resisted the offers and countered only with a six-month interest-only extension so that Windsor could find a new tenant. Windsor declined and instead filed suit for specific performance and injunctive relief last December.
The sides had argued the motion to dismiss is July.
On Monday, Bouchard said that, even if the agreement had created some kind of obligation for CWCapital to negotiate, it would have been too vague to enforce.
“The pre-negotiation agreement does not contain any agreed-upon terms or even a frame of reference for negotiations,” he said.
According to court papers, the loan is currently held by a securitized mortgage trust known as Cobalt CMBS Commercial Mortgage Trust 2007-C2.
Attorneys from both sides were not immediately available to comment.
CWCapital was represented by Daniel A. O’Brien, an associate with Venable. Windsor was represented by Melvyn I. Monzac and Michael C. Hochman of Monzack Mersky McLaughlin and Browder.
The case was captioned Windsor I v. CWCapital Asset Management.