Developers of the Dayton's Project in downtown Minneapolis said Friday they have secured $208 million in financing, averting more legal wrangling with one of the project's former key lenders.
Dayton's Project developer and current owner 601W Cos., along with new financial partners Winthrop Strategic Real Estate and the Fortress Investment Group, refinanced the building, effectively paying off the previous lenders.
601W Cos. will kick in an additional $18 million to cover remaining expenses for the development, which after millions spent and years under construction is set to open fully to the public around Nov. 18.
"This has not been an easy project, but landmark projects and projects this large never are," said Brian Whiting, president of the Chicago-based Telos Group, which partnered with 601W to lead the development's execution.
Ownership of the iconic Nicollet Mall property has been mired in a contentious legal battle between 601 Minnesota, an affiliate of New York-based 601W Cos., and hedge fund lender Monarch Alternative Capital.
Monarch Alternative purchased the original $78 million mezzanine loan from another investor in February. During the summer, Monarch claimed the loan was in default because 601 had failed to lease 20% of the building to office tenants, as had been outlined in the original loan documents.
Monarch said 601 also owed $6.6 million in penalties along with $2 million in monthly building expenses plus monthly mortgage interest. Monarch began to advertise an Aug. 23 auction with the pledged collateral on the mezzanine loan being 601W's ownership stake.
The owners, meanwhile, sued Monarch in June and accused the lender of a "loan-to-own" scheme. 601 Minnesota cited the pandemic as the reason for the leasing slowdown as many downtown office workers continue to work from home. Additionally, 601 said that riots following the police killing of George Floyd had led owners to keep the property boarded up for weeks, which dampened the ability to attract tenants.