A New Jersey state judge has refused to compel consummation of a $50 million Jersey City real estate deal by Hartz Mountain Industries, which backed out and sold to a higher bidder.
Hudson County Superior Court Judge Hector Velazquez dismissed a claim for specific performance and ordered withdrawal of a lis pendens by AECOM Capital Management Inc.
Two years ago, Hartz Mountain, a Secaucus-based real estate firm, paid Bank of America $35 million for 99 Hudson St. in Jersey City, which is situated a block away from the Hudson River and was being used as a parking lot.
The firm considered a residential development for the site but abandoned those plans, and on July 29 entered into a letter of intent with AECOM, contemplating a $50 million purchase price.
Of the site’s 1.8 acres, a 1.5-acre portion was to be transferred to AECOM, and 0.3 acres retained by Hartz Mountain.
The agreement allowed AECOM to conduct due diligence and prohibited Hartz Mountain from engaging other buyers during a 60-day exclusivity period. Finalization of the deal was contingent upon execution of a purchase agreement.
Hartz Mountain began negotiating with another buyer during the 60-day period and on Sept. 30 notified AECOM that the property would be sold to a higher bidder.
That was China Construction America Inc., which agreed to a $68 million purchase price for the full 1.8-acre parcel.
AECOM lodged a complaint in the Chancery Division, seeking specific performance of the sale, and filed a notice of lis pendens, claiming an enforceable interest in the property.
The company allegedly incurred $750,000 in legal, engineering and other fees in anticipation of a final sale.
Hartz Mountain sought dismissal of the complaint and discharge of the lis pendens.
Velazquez obliged both requests in a Nov. 4 decision. “Notwithstanding the many dollars and hours dedicated to the task, no final agreement has ever been finalized or executed,” he wrote in AECOM Capital Management v. Hartz Mountain Industries Inc.
The state Statute of Frauds requires that real estate transfers be written to be enforceable, and courts have held oral agreements unenforceable where the parties intended to be bound by a written one, Velazquez said.
“Here, the record demonstrates that the parties, both of whom were represented by highly experienced lawyers, intended to be bound only by a final and fully executed purchase agreement,” he wrote.
Velazquez also dispensed with AECOM’s claims that, though not finalized, there was partial performance of a sales agreement. The company’s considerable due diligence fees “are the types of ancillary matters that ‘even if costly’ can be compensable by restitution or damages,” not specific performance, the judge said.
“It certainly…would not be equitable to enforce an unsigned agreement that was still being negotiated simply because the Plaintiff engaged in the due diligence and chose to commence its construction and development process,” Velazquez added.
AECOM immediately withdrew the lis pendens. Its claims for compensatory damages and punitive damages, based on the state Punitive Damages Act, remain. Velazquez ordered the matter transferred to the Law Division, though it had not been assigned as of Wednesday.
Justin Walder of Walder, Hayden & Brogan in Roseland—who represented Hartz Mountain, along with partner Roger Plawker—says: “The court properly determined that the letter of intent did not create an enforceable interest in the property and that no purchase agreement was entered into by the parties.”
Dennis Kearney of Day Pitney in Parsippany, AECOM’s counsel, says he’s seeking clarification from Velazquez because the judge in his opinion didn’t address concerns he previously voiced about Hartz Mountain’s conduct in courting China Construction.
Hartz Mountain’s actions were “pretty much an acknowledged breach” of the letter of intent, Kearney says.
The sale with China Construction closed a few days after Velazquez’s ruling, Hartz Mountain general counsel Erwin Horowitz confirms.
China Construction, a Jersey City-based subsidiary of a Beijing construction powerhouse, paid about $71 million for a Morristown office building in April. ■