Ambase Corporation (ABCP) – Litigation Stub – 650% potential return

Current Price – $0.22

Potential Recovery –  up to $1.43

Upside – up to 650%

Expiration Date – TBD

This idea was shared by David.



  • Current price: $0.23 (thinly traded). Market Cap: $9.4mm
  • Litigation stub – potential recovery of up to $150+mm
  • CEO (and 40% owner) recently agreed to finance litigation expenses on contingent basis
  • Public court filings are available detailing Ambase’s claims against their JV partners, the Developers.  See 10Q for case index number references
  • A 20% holder just added to stake in high $0.20s



Ambase has (or perhaps had – more on this later) one investment of note, which is a stake in an LLC that was developing a super-luxury high-rise condo building at 111 West 57th Street in NYC. Click here for the property website. The building is currently about 1/3 built. Sales are expected to begin in 2018, though some units are apparently already under contract.  Here is a good article about the current situation.

Ambase recently saw its equity interest in the project foreclosed upon by a junior mezzanine lender – though Ambase is appealing the Strict Foreclosure. The proximate cause of the foreclosure was budget overruns of $60mm+ in the $850mm project.

What makes Ambase interesting, even if the foreclosure is affirmed on appeal, is a provision in the Amended Joint Venture agreement between the Developers and Ambase that gives Ambase the right to put its stake back to the Developers (at a 20% compound return) if the “hard cost” budget grows past a certain threshold (“Equity Put Right”). More than a year ago Ambase filed a lawsuit against the developers alleging, among other things, that this equity put right had been triggered by budget overruns. The developers did not dispute the budget overruns, but instead said the conditions precedent to exercising the put option had not been met. Their arguments in opposition are not particularly compelling, IMHO.

For context, if the Put was exercised and honored, Ambase would be entitled to a payment approaching $150mm.  The stock traded today at roughly $0.25 (Market Cap: $10mm). If Ambase were to settle the lawsuit against the developers for just the amount invested in the project, it would receive $65mm +/-.  Note that any settlement amounts would be subject to the CEO’s Litigation Funding Agreement proceeds sharing requirements.


The Dispute

The Developer unequivocally controlled and managed the budget and the budget overruns are undisputed. The dispute centers on whether the “hard costs” increased by 10% triggering the Equity Put Right or if non-triggering costs increased instead. Due to the budget overruns, the lenders in deal required additional equity at the end of 2016. Ambase would not approve a financing, though Baupost had been lined up, because (and this is my conjecture) to do so would require their approval of a budget that Ambase felt was inaccurate and would eliminate their ability to exercise the equity put right (In the recent 10Q Ambase refers to “concerns about…the implications of the Proposed Budget”). So, Ambase refused to consent and the project went into foreclosure. Ambase is appealing the strict foreclosure by the new lender, Spruce Capital, but the prospects in this lawsuit are uncertain. There is a very real possibility that Ambase will lose its entire interest in the development project. They wrote off the entire investment in the Q3 2107.


The Thesis

Ambase as litigation stub. The CEO and 40% owner of Ambase, Richard Bianco, recently announced that he would underwrite the continued litigation (opposing the strict foreclosure and pursuing the equity put right, among other claims) against the developers on a contingent basis.  He apparently feels very strongly that Ambase has been wronged by cutthroat NYC real estate developers.  Based on my reading of the complaint and the developers’ replies as well as other filed documents, I agree with him.

Bianco is also lending working capital to the company, secured by the company’s office in Greenwich CT, to fund its limited operations.


Ambase’s Arguments and links to docs

Here is my high level summary of the situation and links to key documents in the public court records:

  • The project at the time of foreclosure was roughly $60mm over the June 2015 budget – which, importantly, is the last “approved” budget
  • Developers (“Sponsor”) had exclusive control over developing and managing the budget. Blowing the budget was the proximate cause in creating the loan’s out-of-balance condition.
  • The JV Agreement permits ABCP to exercise it’s Put Right under certain budget growth conditions outlined in section 11.5 –…
  • Developers were required by JV Agreement to supply a budget for approval by Ambase at least as frequently as within 60 days of the end of each fiscal year. Absent a new approved budget, the developers had to work under the last approved budget.
  • Despite this requirement, Developers did NOT submit a proposed budget for approval between June 2015 and August 2016. This is undisputed.
  • In response to a discovery request, Developers provided a “budget” in August 2016.
    • Ambase asserts this budget, the first one Ambase had seen since June 2015, has greater than 10% growth in “Hard Costs” and thereby triggers the Put.
    • Developers say this August 2016 budget “was never ‘submitted’ to investment pursuant to Section 8.2 of the JVA Agreement to ‘approve’ or disapprove’, the production of this draft in discovery did not and cannot trigger Investment’s Equity Put Right under section 11.5.…
      • Note: Developers do not dispute the numbers in the August 2016 budget, nor the fact that they had not submitted required budgets since June 2015, they just assert that the August 2016 budget was not “submitted” for approval.
  • ABCP believes it has found additional evidence via discovery that the put should be enforced –…
  • Might the foreclosure, in a perverse way, strengthen ABCP’s argument?
    • “You see, Your Honor, we negotiated for the Put right to protect us against the developer blowing the budget and getting into trouble. And, they blew it. Now, about our Put…”

Based on the publicly available briefs and filings, I think the fact pattern tilts in favor of Ambase, but clearly only a court can decide and the timeframe is uncertain.

Two open questions: (i) does the case ultimately have merit and (ii) can the Put really be exercised and against whom/what entity.  I don’t have answers to these questions, and likely no one can know for sure at this time, hence the current trading price.

That said, the CEO, who has the best visibility on the legal cases, is putting at least $7 million of his own money behind the lawsuit.  And, he won’t get paid back if the lawsuit results in no payment to Ambase.


88 thoughts on “Ambase Corporation (ABCP) – Litigation Stub – 650% potential return”

  1. If the put gets enforced, where is the money coming from? Do JDS Development and Property Markets Group have the cash sitting around, or will they need to wait for the project to finish and sell their share before paying out?

    • Both are huge development companies, so if put right is enforced they should have funds for the payout.

  2. I would agree with DT on the ability for Ambase to find a source of cash for a settlement. Technically, the Put is against an LLC ( It is against “Sponsor”, which is defined as “111 West 57th Sponsor LLC”), but lawyers I have spoken with confirm that one can “pierce the veil” in certain circumstances. Further, Bianco must be getting advice that there is cash to be had or else he likely would not be underwriting.

    • Can you elaborate on your comment that one can “pierce the veil” in certain circumstances? I understand this is very rare unless there is clear fraud…obviously this is being alleged by ABCP, but let’s imagine a scenario where the courts rule the equity put is valid but the recourse stops at the 111 West 57th Sponsor LLC entity. How would ABCP collect their equity put funds in that case?

  3. So basically we a situation where we have a real chance to receive $150 mm with a probalitiy of >50%. Otherwise the CEO wouldn’t put up the $7 mm plus working capital financing. In case the court decides against Ambase, the stock won’t be worth anything. Do we have any idea of how many years this will take?

    • I would agree that the downside is $0. As for timing, the initial suit was filed in April 2016. Discovery has been underway for more than a year now. There is a defendants’ Motion to Dismiss pending on the initial case (652301/2016). I would like to think that the court rules on that motion in the relatively near term. Given what I have read, I have a hard time seeing how the Court would dismiss ABCP’s claims entirely though it is a greater than 0% probability. Defendants have no incentive to settle prior to a ruling on the M to Dismiss. Assuming the motion is rejected, in whole or in part, the conversation should change. Particularly since Bianco has indicated he is in this fight for the long haul with his $7mm+ committment. If look back, you can see from Bianco’s history, he is a fighter. Having spoken with him a few times at shareholder meetings, he feels strongly that he has a case.
      And one other tidbit. Recall that the terms of the Put require a 20% compounded return on ABCP’s investment of roughly $65mm. Taken literally, this could imply that the meter is running through the litigation as well. This at least can help Ambase stake out the “ask” to start any settlement discussions if and when they occur.

      • davea500,
        do you think that it was the developers intention from the start to put some kind of trick on ABCP?

      • Fernando – I have no way to know. However, Ambase is a public company and that provided the Developers with visibility on ABCP’s dwindling cash position prior to the June 2015 construction financing was closed. Did the Developers make capital calls that ABCP could not fund to dilute their equity interest? Ambase notes in their complaint that as soon as the Construction financing was closed, Developers made an equity distribution of $25mm+ to the JV.

        The budget overruns are undisputed. And the fact that Developers did not provide budgets as required is undisputed. It is hard for me to see how at least some of the $50mm+ budget overruns should not be considered “manager overruns” as defined in the JV and therefore solely the Developers responsibility and not the JV’s. In fact, Ambase alleges that the Developers neglected “to budget for a construction cranes.”

        This document provides a helpful background timeline (at least from ABCP’s perspective):

    • work22 – yes, you are correct. Everyone will have to do their own math and model settlement amounts versus the split and timing, but I think there is room for his split and benefit to ABCP shareholders at current prices. Back of the envelope, if, for example, ABCP settled the litigation for $65mm (roughly the amount they invested in the JV) within the next three years, repaid Bianco litigation expense advances and split the remainder 30% for Bianco and 70% for Ambase, there is upside IMHO..What is the probability of any particular outcome? That is the open question…

  4. Ruling posted in Motion to Dismiss. ABCP’s equity put right remains alive.

    “…Plaintiffs [Ambase] have sufficiently pled that defendant’s refusal to timely submit a proposed budget for Investment’s approval as required by the JVA has frustrated Investment’s rights under section 11.5 and, as such, Investment may maintain this claim as a violation of the implied covenant of good faith and fair dealing.”

    Link to ruling:

    • A few more thoughts…
      1. The Judge agrees with the Developers’ position that the August 2016 budget was “never proposed” for approval (since Ambase got it via discovery) and as such, given that a “proposed budget” is a condition precedent to exercising the Equity Put Right, the judge finds that the Put could not be exercised based on the [un-proposed] budget from August 2016. Hence, as she states on page 25, there is no “express violation” of section 11.5. However, she lets stand the “frustration” claim based on the fact that Developers refused to “propose” budgets as required in the JV Agreement, which, based on the Judge’s own reasoning, had the indirect effect of making exercising the Put impossible.

      2. I believe it is important to recall a document that has been redacted that appears to contain some useful information from Ambase’s perspective – While we may never see this redacted document, the comments from Ambase’s attorney are quite intriguing as they relate to the Put Right.

      Bottom line, some critical Ambase claims survived the Motion to Dismiss.

  5. Repeal of Alternative Minimum Tax under Jobs Act and 20$ mln. refund that Ambase entitled to, makes a much more limeted downside.

    • That does appear to be a positive development. If perhaps Company could borrow against those future refunds, shareholders could be less exposed to expensive Litigation Settlement financing with Bianco.

      On another note, I attended hearing a few weeks back and Ambase’s attorneys said they had found “explosive” emails in discovery and, as a result, a third amended complaint is forthcoming, apparently. See case file for Defendant recent filing on this topic.

    • You can read IsZo’s entire complaint online. I don’t yet know what to make of it. Bianco’s reply is expected in May and hopefully it will shed more light.

      I am interested in the basis for IzSo’s claims. Some are indeed quite explosive. I am particularly struck by IsZo’s assertion that ABCP could have approved the Baupost financing AND maintained their disputed equity put right because implicit (or explicit) in approving the Baupost deal was Ambase’s approval of the “December 2016” budget. Once a new budget is approved, the Put Right, as it relates to the previous budget, would be obviated -at least as I read it.

  6. Ambase files a Third Amended Complaint with additional Claims including new RICO claims –

    Excerpt from page 2: Ambase is the victim “an elaborate and long-running fraudulent scheme by developers…Defendants engaged in a pattern and practice of fraud that included the following: [REDACTED], maintaining two sets of books and providing fraudulent budgets to both debt and equity investors…Under RICO Plaintiffs seek treble damages, costs and attorneys fees…”

    Defendants’ reply expected in a few weeks.

  7. Defendants/Developers have “removed” this case from NY state court (Justice Bransten) to Federal Court – SDNY. New case number at SDNY is 1:18-cv-05482, Third Amended Complaint is still the operative complaint.

  8. Here is a link to Apollo’s recently filed Motion to Dismiss Ambase’s action against them:

    What I found significant in the Apollo reply was that Apollo AGREES that that ‘hard costs’ increased by more than 10% from the June 2015 to the December 2016 budget (see foot note on page 19 of 27 in Apollo MTD). This would appear to be significant support for Ambase’s argument that the Put Right was rightly exercised based on the December 2016 budget increases proposed by the Developers.

  9. New NYT article about 111 W 57th:

    Per the article, condo sales start on 9/13/18, though Apollo has indicated in earlier calls that some units are already under some type of agreement.

  10. On 10/25/18, Judge Torres of SDNY dismissed RICO Charges and effectively remanded the balance of claims to NY State Court. I frankly found the RICO claims to be a stretch, but regardless, the critical claims about the Equity Put Right remain to be litigated in NY State Court. Importantly, Apollo, the mezzanine lender in the deal, has stated in their own court filings (related to Ambase suing Apollo) that they believe the budget increases in Hard Costs were in excess of 10% budget to budget thereby triggering Ambase’s put right.

  11. Ambase has apparently appealed Judge Torres’ ruling. Court of Appeals Docket #: 18-3480. Notice of appeal date 11/19/18. No comment from the Company on this, but it shows on the SDNY docket.

  12. Free option on litigation outcome? Given that:

    1. Ambase expects to receive $20mm in tax refunds over the next few years
    2. CEO is funding litigation against Apollo and the developers on contingent basis

    At current trading prices, depending on your burn rate assumptions, one can make the case.

  13. IsZo Capital’s (20%+ holder) suit against Bianco, et al alleging five causes of action for breach of fiduciary duty and declaratory judgment allowed to proceed in part in ruling dated 12/26/18. This result may provide shareholders some leverage with respect to the Litigation Funding Agreement terms should Company settle/prevail against Developers.

    Lawsuit Index No.: 650812/2018 (Supreme Court of the State of NY, NY County)

  14. Per 8K filed 3/4/19: Company received first installment of expected tax refunds. From the filing:

    “In January 2019, AmBase Corporation (“AmBase” or the “Company”) filed its 2018 federal income tax return seeking a refund of approximately $10.7 million of AMT credit carryforwards as provided for in the 2017 Tax Cuts and Jobs Act (the “2017 Tax Act”). In March 2019, the Company received a $10.7 million federal tax refund based on the Company’s 2018 federal income tax return as filed.”

    Additional tax refunds, expected to total approximately $10mm, are anticipated in future years.

  15. The Foreclosure is not a settled matter. From a Jan 18 2019 ABCP 8K:

    “The Appellate Division’s decision indicates that the Company’s [Ambase’s] request for a declaratory judgment is *not* (my emphasis) moot “because plaintiff 111 West 57th Investment LLC (‘Investment’) might be entitled to damages from defendant 111 W57 Mezz Investor LLC (‘Junior Mezz Lender’) if it is judicially determined that Investment had the right to object to the strict foreclosure pursuant to Uniform Commercial Code.” The Appellate Division noted that the Company should be allowed to move for leave to replead or amend to state claims for damages and/or the imposition of a constructive trust, as the dismissal of the Company’s claims was without prejudice. ”

    Pursuant to this, on 3/19/19, Ambase filed its motion for leave to Amend its complaint.

    Notable in Ambase’s motion is more detail regarding Ambase’s assertion that the Sponsor (Stern and Maloney a.k.a. the Developers and the Defendants) did NOT object to a strict foreclosure by Spruce in exchange for assurances that they (Stern and Maloney) would (i) continue to manage the project, and get paid to do so and (ii) they would be given new economic upside in the deal AND, implicitly, that Ambase’s equity interest would be wiped out. The basis for this is an amendment to an Inter-creditor agreement that was executed as a condition to Spruce acquiring the Junior Mezz piece of capital stack in June 2017.

    This case is index no.: 655031/2017 (access here:

  16. On 10/25/18, Judge Torres of SDNY dismissed Ambase’s RICO charges against the developers and effectively remanded the balance of claims to NY State Court. Ambase appealed Judge Torres’ ruling. Court of Appeals Docket #: 18-3480.

    Today, the Court of Appeals, 2nd Circuit, scheduled oral arguments on Ambase’s appeal of Torres’ ruling. This is encouraging at least insofar as the appeals court could have rejected the appeal outright or ruled on the appeal papers without argument.

    Separately, Ambase will file a response in the litigation related to the foreclosure today.

  17. Today, the Court of Appeals, 2d Circuit, upheld Judge Torres’ dismissal of the RICO charges finding that Ambase had not demonstrated the requisite open-ended or close-ended continuity.

    However, the Appeals court overturned Torres *dismissal (without prejudice)* of the State claims, and instead remanded them to State Court. As the Appeals court noted: “…the state-law claims have already been substantially litigated in state court, to the point that certain claims have survived a motion to dismiss. Making Ambase start anew would be unreasonable in these circumstances.”

    So, while RICO would have been powerful, it was always going to be a hard case to make. The good news, is that a remand can hopefully speed this process up. And recall that a claim related to the critical “Equity Put Right” already survived a motion to dismiss at the state level.

  18. Foreclosure matter update based on 10/11/19 Appellate Division Order:

    Recall that, in addition to pursuing claims related to the Equity Put Right, Ambase has also been seeking to have the Strict Foreclosure of the property by Spruce Capital invalidated by the NY courts arguing that Spruce bribed the Developers to not seek a foreclosure sale of the equity, and instead just hand over the property to the $25mm lenders. While the lower, NY Supreme Court, has not been particularly receptive to Ambase’s arguments related to the UCC and JV Agreement, the Appellate Division has been. Having sat in on two hearings at the state level on the foreclosure matter, it appears to me, at least, that the lower court has not taken the time to understand the nuances here and twice now the Appellate Division has stepped in to say, in effect, “not so fast, we want to hear more”.

    In my 3/12/19 comment above, you see reference to the first time the Appellate Div stepped in.

    Last week, on 10/11/19, the Appellate Division stepped in again, this time granting Ambase’s requested Stay of a lower court Order cancelling Plaintiff’s [Ambase] notice of pendency filed against 111 West 57th Street pending a full hearing of the Appeal in the months to come.

    Ambase’s attorney, in a letter to the lower court — Justice Sherwood (link below), makes the following comment as it relates to the 10/11/19 Appellate Division order:

    “This Order further evidences the Appellate Division’s tentative conclusion that the strict foreclosure was improper and invalid and that the constructive trust claim previously recommended by the Appellate Division in its January 17, 2019 Order deserves to be protected by an injunction pending appeal. ”

    The upshot of this, from my perspective, is that both the Equity Put Right claim and the invalidation of the Strict Foreclosure remain live claims. These matters overhang the property just as the building is being completed and sales are getting ready to close. Hard to know how this impacts any potential settlement discussions, but I believe that Ambase retains a good position in both matters.

    Link to Ambase attorney letter to court:

  19. Hi, can someone explain why the downside is limited? Does ABCP have significant net assets per share relative to its stock price? Seems like a very compelling case if they already have enough net assets that are signifcant to its current market cap/trading price per share.

    • At the time of the write up, the CEO, Bianco, was underwriting the litigation on a contingent basis. Since that time, Ambase secured a $20mm tax refund (see comment from Pavel above – detailed in ABCP’s filings.) Ambase has received $10.7mm of the $21mm and will receive the balance in coming years. Given the refund, the litigation funding agreement with the CEO was terminated and his contingent fee was adjusted downward.

      The downside, assuming no settlement/victory in the litigation, will be a function of your operating expense assumptions.

      Ambase asserts it is entitled to its share (50%+) of the remaining balance of a roughly $16mm pre-funded insurance deductible. It is hard to know what this amount ultimately would represent, but I think it could be recovered even apart from the larger litigation.

      • Excellent. That’s a very well reasoned assumption. Thanks. Why risk remains with stewardship, I am inclined to agree downside is limited.

  20. Given that someone is offering stock more cheaply than the market has seen in some time (tax loss selling perhaps, as I see no new facts), this is a reminder that Ambase’s critical Equity Put Right claim has already survived a motion to dismiss.

    Justice Bransten’s ruling on Second Amended Complaint: “…Plaintiffs [Ambase] have sufficiently pled that defendant’s refusal to timely submit a proposed budget for Investment’s approval as required by the JVA has frustrated Investment’s rights under section 11.5 and, as such, Investment may maintain this claim as a violation of the implied covenant of good faith and fair dealing.”

    A quick look at the facts:
    – The JV Agreement *required* Developers to present a budget no less frequently than within 60 days of the end of each fiscal year.
    – Hence, a budget was due for Ambase approval by early March 2016.
    – Ambase finally received a budget for approval in December 2016. This is undisputed and Developers have never explained why the required budget was not provided in a timely manner.
    – The put right entitles Ambase to a 20% IRR on its $60mm investment

    Despite Developers “manipulating the budget and once again misrepresenting the costs of completing construction” [per Ambase’s complaint], Ambase asserts the December 2016 triggers the Put Right. Importantly Apollo, the Mezzanine lender, agrees (based on its filings in a related matter).

  21. Hi Dave-

    Thanks so much for your perspectives. Wondering where you put the odds of at least a one percent hundred percent gain on this versus the downside of it going to zero? Also wonder what is the time frame range you are guessing for resolution? Thx in advance!

    • I am long the stock….Beyond that, I am not sure if there is anything meaningful I can say about relative probabilities.

      As for timeline, it is hard to say. Litigation is a slow process. Ambase’s decision to pursue RICO charges (which were ultimately dismissed) likely extended the process by at least one year. However, the fact Ambase even pursued a RICO case demonstrates Ambase’s view of the gravity of the evidence identified in their Third Amended Complaint.

  22. Suppose the Put Right claim is asserted – what are the chances that they will actually collect on it? Do you know whether the defendants have enough asssets to make good on the put claim?

    Also keen to know your burn cost assumption if you have one.

    Thanks for the detailed updates!

    • The Put Right is against Sponsor (as defined), but I suggest you review Section 8.7 of the Amended JV Agreement and the Limited Joinder. I would also direct you to the “Seventeenth Claim for Relief – Contractual Indemnification” in the Third Amended Complaint (link in the messages above).

      Based on published reports and some of the Net Worth requirements discussed in the documents, Stern and Maloney and their entities have resources. What could they ultimately afford to pay if they had to? Hard to know from the outside.

      I would direct you to the filings for costs.

  23. A number of Ambase’s claims against the foreclosing lender, Spruce, survive a Motion to Dismiss per an order from Justice Sherwood dated 1/27/20 (filed 1/29/20).

    Recall that Ambase alleges that Spruce’s “Strict Foreclosure” of the equity of the property was improper for a number of reasons. Justice Sherwood appears to sidestep a few of the issues related to standing, but permits the second cause of action to stand based on two of Ambase’s allegations that Spruce acted in bad faith by: (i) bribing the developers to not object to the Strict Foreclosure and (ii) obtaining rights (i.e foreclosing on property) with a value well in excess of the amount owed.

    A conference on this matter is scheduled for early March.

    Link to order from Justice Sherwood:

  24. Hi Dave,

    Any update from yesterday’s court date? According to the last filing they should have been in court yesterday, but I’m not able to find any new filings or PR. Any info is helpful and welcome.


  25. There was status conference on March 3 in the Ambase v Spruce improper foreclosure matter. Visit this site: and search the following Index number: 655031-2017 for the latest documents. You will note that Spruce has appealed the Judge’s ruling on their Motion to Dismiss that allowed some of Ambase’s claims to survive. A discovery schedule was developed at the 3/3 status conference according to the docket.

    There will be another status conference on the Ambase v Sponsor original matter (which involves the Equity Put Right) at the end of March.

    In the meantime, Apollo has extended the maturity of their Mezz construction loan until Sept 2020 and the developers have indicated that condo sales wilbegin to close later this year.

    • Thanks for the update. Very informative and extremely helpful with the links to the docs. Will keep my ear to the ground for end of March.

    • Nothing new in 10K to my eye, but it does provide a good summary of the litigation for anyone who wants a recap.

      As of 12/31/19: $13mm in cash. A burn, including legal, of call it $5mm/year +/-.

      Certain of Ambase’s key claims against both the Developers and the Mezzanine lender, Spruce, have already survived motions to dismiss and will progress this year, once the courts in NY reopen. Closing on condos in the building are also expected this year.

      If you are looking for something to read during your “stay at home” order, I recommend Ambase’s un-redacted Third Amended complaint (“TAC”) against the developers. As you read it, recall that the RICO claims are dead – they were dismissed by the Federal Courts. However, claims 7 through 18 have been remanded to NY State court and are pending before Justice Sherwood. Even if you discount the litigation hyperbole, the allegations against the developers are, in my mind, stunning.

      Link to TAC:

      Stay safe everyone.

      • Thanks Dave! Always appreciate your insight. Hope you’re staying safe.

  26. Just saw Richard Bianco purchased 100k shares of Ambase on 5/20/2020 at $0.18/share. Any speculation if this was a planned purchase, or if this feels like a bullish signal regarding the litigation? I would imagine a resolution is still a ways out, particularly with covid still slowing things down, but I might add to my position here if the feeling is that this is not a standard planned purchase and is instead any kind of indicator that Bianco feels a resolution is near at hand.

    After reading through the TAC against the developers, I have to agree that the allegations are stunning and I am hopeful for a ruling in favor of Ambase, though my feeling is we still have a long way to go before we get a ruling.

    Interested to hear what you all think.

    • I think the purchase is interesting and can only speculate on its meaning.

      Some thoughts:
      – This is Dick Bianco’s first open market purchase since October 2014, well before the current circumstances, and he already controls nearly 40% of the common. Why add 100K? I have seen no disclosure suggesting the purchase was planned.

      – In addition to Dick Bianco, director Jerry Carnegie made his first (ever) open market purchase of ABCP on 5/20/20;

      – There were other bidders, so no need to “prop up” the price. Not clear what propping would do for him/the company at this stage, anyhow;

      – “Professional and outside services” expense (largely legal fees) were at highest levels in two years in Q1 2020. Note there was a new complaint filed against Custom House Risk Advisors (Insurance) in the Q claiming aiding and abetting breaches of fiduciary duty and fraud. These alleged transgressions had been mentioned in previous complaints, but it is the first claim filed against Custom House and broker, Elizabeth Lowe;

      – Recent tax legislation has allowed Ambase to accelerate the recovery of the balance of its AMT refund, note the change from 12/31/19 to 3/31/20 in the “Deferred tax asset” and “Federal income tax receivable” line items

      – NYC courts have been closed since mid-March due to COVID. It is unclear what, if any, progress has been made in the interim.

      All in all, I think Bianco’s purchase is a good sign.

      Looking ahead, there are a number of matters pending before the NY Appellate Division – First Department. In my limited experience, the First Department has worked faster than the lower court.

      • Thank you for the valuable insight as always Dave. I agree that Bianco and Carnegie’s purchases are a good sign and I’ve increased my position as a result. Will be keeping an eye out for any new information as the wheels start turning in NY again.

    • This may be a stupid question, but what legal qualification does Bianco have? I don’t see that mentioned anywhere in any of these write ups. What makes you think he is not taken to the cleaners by the lawyers here? Does he give the lawyers a share in proceeds + a much lower (or zero) hourly rate? What is the compensation structure like for the lawyers?

      Thesis seems to hinge on that. What would a seasoned lawyer say who will not make a dime on this, or will have to work for free for a share in the proceeds.

      Im sure Bianco must feel wronged, but if he is going on emotions with little legal experience, it does not mean much. I see mentioned here that he is a fighter, but if payout is not high enough to cover high legal costs, that will not mean much.

      Insider buying only matters if they really know something you don’t.

      • As for the legal expenses, I have seen no indication that any of the Company’s legal counsel is working on a contingent basis. The P/L shows a varying “Professional and outside services” line item which I believe represents the cost of counsel.

        You will have to make your own judgment about the merits of the allegations. It was pointed out on this message board that Bianco purchased stock and, on balance, I think that is a positive. However, his purchases or lack thereof are not a part of my thesis, at least. I have read hundreds of pages of filings and I like the risk/reward.

        In my view, the negotiated JV Agreement gives Ambase the right to put its interest back to the Developers at a 20% IRR if the Developer-managed budget is busted by a certain amount and, the budget was busted. Importantly, it is *undisputed* that (i) the budget was busted (see foreclosure) and (ii) the Developers ignored a requirement to provide an updated budget for nearly 1 year. Why would they do that? When a budget was finally “submitted” to Ambase for approval, it showed a percentage increase (from prior approved budget) of just a few basis points less than the threshold required to exercise the Put Right. How convenient. Even Apollo’s initial shortfall request triggered the put right based on budgets in the request, as, allegedly, did all of the draft budgets the developers shared with Apollo (but not with Ambase, as required). Apollo then inexplicably rescinded that request and provided an updated shortfall request which allegedly came in just short of the 10% hard cost growth threshold.

  27. Was digging a little as well and I found this Jewel right here which potentially seems to be a plus with the amended terms. Basically they cover less of litigation expenses or 7.5m and then it is a 75:25 payout ratio from the court proceedings between the company and Bianco. Found on Page 17 of their 10-Q.

    The Amendment provides that, in the event that the Company receives any Litigation Proceeds from the 111 West 57th Litigation, such Litigation Proceeds shall be distributed as follows:

    first, 100% to the Company in an amount equal to the lesser of (a) the amount of actual litigation expenses incurred by the Company with respect to the Company’s 111 West 57th Litigation (including the Advanced Amount); or (b) $7,500,000; and

    thereafter, any additional amounts shall be distributed (a) 75% to the Company and (b) 25% to the Mr. R. A. Bianco (a reduction of Mr. R.A. Bianco’s percentage, which under the terms of the original LFA prior to the Amendment would have been 30% to 45% based on the length of time of any recovery).

    • Zulu – yes, that is a change from the original litigation funding agreement with Bianco. The change was made once the Company knew it would get $20mm in cash from alternative minimum tax refunds. Prior to that windfall, Bianco had agreed to fund litigation himself at a richer split in his favor on recovery.

      You may also recall that a former shareholder (IsZo Capital) sued the company about the initial litigation funding arrangement with Bianco arguing it was self-dealing and that other funding sources might have been available (reading between the lines, perhaps IsZo). That suit has since been dropped as IsZo sold his entire stake at YE 2019. IsZo’s sale was, I believe, tax related and not fundamentally based.

      Personally, I am frustrated that the updated deal effectively caps the Company litigation expense recovery (before the split) at $7.5mm.

      • Yeah that amount seems to be self serving for sure but at the end of the day hopefully isn’t too material if they receive a large windfall!

      • Dave,

        Thank you for your perspectives. If we assume a cash burn of 5m annually, the timeline is about 2-3 years since they have about 13m in cash and 5 years, counting the 10.7m to be collected over the few years. The case results are at this time, still unknown. How big of a concern do you feel about:

        1) the annual cash-burning, (which could impair the net-net thesis aspect of ABCP)
        2) the risk of Bianco misusing the capital
        3) the prolonged court progress?

        Obviously the longer this drags on the more cash is used for the expenses, and that can hurt the zero/limited downside thesis. Thanks for your time on this. Really interesting investment case.

  28. Zulu – to your questions:

    1. I personally don’t view the (current) net-net aspect of ABCP as significant. They are not going to liquidate prior to resolution. So, as I see it either ambase prevails in some capacity or they don’t. If, at some point, they have lost on all legal fronts, i don’t imagine there will be a lot of cash left, just disappointment. In the unlikely event that the company spends all of its current cash on legal costs, I think Bianco would, again, step up to fund the litigation, though at a price.

    2. I don’t worry about Bianco misusing capital during this period; he will spend it on litigation and his and John F’s salaries. Should Ambase win and have a cash windfall we can debate Bianco’s capital allocation priorities.

    3. The court process is slow as we have seen. As i mentioned, the RICO charge pursuit cost us a year, but that is now behind us. Going forward, i don’t know what to expect as to timing. But as I said above, a number of critical questions are now before the NYS Appellate Division – First Department. I am hopeful they will move with more speed than the lower court. The developers are also going to need/want to refinance the Apollo mezzanine tranche in the next few quarters. Some of the current litigation may make that more challenging so perhaps that need can catalyze something good for ABCP shareholders.

    • Hi Dave, thanks for your detailed response.

      Just wanted to address and ask about 2. Winning the court case and obtaining the large windfall Is one thing. It’s very obvious he won’t squander the money in this period. Agreed. What Bianco does with the windfall is the second part. I guess I’m just not sure what his intentions are and I would like to try and find some pieces of insights that would at least suggest what he will do with the capital thereafter. In order for this thesis to work, Both parts have to play out.

      • The last time they had a major cash windfall…they invested in this project! If I remember correctly it went up a lot once they got the windfall from litigation and then fell like 20% after they announced the investment. The stock eventually went back up towards the investment amount but fell back down as the investment went south. I have been an investor on and off for 10 years so I’m familiar with the story.

      • Nuggy is right, rather than liquidate with the Carteret litigation proceeds, they invested in 111 W57th. Dick Bianco is 72. I don’t know what he plans to do should they succeed. His family members are well represented in the company/board, so perhaps they intend to carry on? I just don’t know.

        Having said this, in my view, a litigation win here, is a win. The current market cap of the company is roughly $10mm.The Equity Put Right claim alone , if enforced and paid, would amount to more than $150mm. If Ambase just settled with Developers for the amount of their initial investment, that would be $60mm +/-. Heck, if they just settled for legal fees (call it $10mm), that could make the stock a double today on an asset basis. So, even if Bianco said he was going to invest the proceeds in a start up Cruise Line, I think the market would reward shareholders for a litigation recovery vis a vis the stock price today.

        Long way of saying that while I don’t know what would be done with any proceeds, that is a much lesser concern for me at the moment.

  29. @davea500 I agree wholeheartedly. While he may end up squandering the money again to maintain power control and a salary, any win will send the price higher. I have a pretty small amount of my PA in this but this feels like a pretty good bet. Does anyone have an idea of how much money (irt the 7.5mm) has been spent so far? Or what future funding would be?

  30. Suppose they win will the Developers be liquid enough to settle?

  31. WSJ article highlighting two recent sales of condos at 111 W57th. Certainly will help Ambase to have the building be successful.

    “The coronavirus lockdown has frozen Manhattan’s luxury real-estate market, with the volume of deals slowing to a trickle over the past three months. But one developer said he’s seeing signs of life on—of all places—Billionaires’ Row in Manhattan.

    Two units asking roughly $30 million each have sold at the under-construction condominium 111 West 57th Street since March, according to Michael Stern of JDS Development, one of the building’s developers.”

  32. Important new evidence recently appeared in the case against Spruce for improper foreclosure. Forgive a little history here, but I think it is important.

    Recall that Ambase is alleging that Spruce, the foreclosing junior mezzanine lender, bribed Stern and Maloney to *not* object to a STRICT foreclosure (i.e. handing over the keys) thereby ensuring there would not be a foreclosure sale that could have resulted in excess value above the face $25mm of Jr Mezz debt flowing to Ambase AND Stern and Maloney. This was non-recourse debt too, so the fact that Stern and Maloney did not insist on a foreclosure sale of the project’s equity is very odd and their explanation (avoiding liability from a “guarantee”) is unconvincing. Spruce benefited because they wanted the equity and did not want competitive bidding to drive up the price. In a Strict foreclosure they just swapped their debt, which they purchased at par days before, for 100% of the equity in the project. Since the foreclosure, Stern and Maloney have been brought back into the deal.

    Ambase alleges that, prior to the strict foreclosure, there was a secret agreement between Spruce and the developers to permit strict foreclosure, cut Ambase out of the deal and then allow the developers back in. This seems a little conspiratorial, right? Well, yes, except that Spruce’s attorney told the court that it happened in 2019 – and Ambase recently disclosed they have found further evidence to confirm it happened.

    I was in the courtroom on the day the following exchange took place (3/19/19) – my emphasis is added. It was a catalyst for Ambase’s complaint against Spruce for acting in bad faith under the UCC.

    SPRUCE ATTORNEY: Just a minute Judge, the project is being funded by the senior lenders, and only because my client [Spruce] came in as a $25mm mezzanine, and ACTUALLY GOT ALL OF THE PARTIES TOGETHER IN RELIANCE ON THE FACT THAT THERE COULD BE A *STRICT* FORECLOSURE HERE, in reliance on that fact —

    JUDGE: That reliance is evidenced by what?

    SPRUCE ATTORNEY: There are two things, Judge.

    JUDGE: Is there an agreement?



    Note that the Spruce Attorney says his client got “all parties” together. Well, Ambase, the largest equity investor in the project, was *not* included.

    This brings us to the recent filing. On 10/9/20, Ambase filed a reply in the Spruce matter before the NY Appeals court and made the following comment a footnote on page 11:

    “Discovery that has proceeded in the wake of the Order [dismissing some Ambase claims and upholding others] has further confirmed the existence of [an] agreement.”

    While the Equity Put Right is a key to this investment, this new evidence, seemingly confirming a back room deal, makes Spruce’s conduct in the foreclosure another driver of a potential settlement/recovery for Ambase.

    In sum, at today’s stock price, there are many ways to win.

    Here is a link to the Ambase reply referenced above:

    • Thank you Dave. You remind me of Li Lu. Great work.

  33. Thanks Dave. Been following along and reading through the filings. Seems like we’ve still got a decent wait ahead of us, but pay-tience is key.

    • Ha, true. I nearly fell out of my chair when i remembered that this idea was initially posted nearly three years ago. Assuming the legal process goes to its conclusion, yes, it could be a while. However, I think there always remains a chance for a settlement, and the results of some of the Appellate arguments scheduled for Oct, Nov and Dec 2020 could catalyze this process one way or another.

      Interestingly, Ambase is largely to blame for the pace. They were the ones who added RICO charges in the THIRD Amended Complaint (TAC) and they are now seeking to file a FOURTH amended complaint (FAC) versus the developers (developers are opposing). However, Bianco is not dumb and he does not want to waste money (he owns 40% of the company). So, while we are not privy to the overall legal strategy here, I have to believe Ambase and counsel have weighed the timeline against the potential outcomes and concluded this is the optimum strategy.

      A quick note about the proposed FAC. I think it contains some very significant new information related to the Put Right. I won’t detail the changes compared to the TAC here, but I would direct you to Paragraphs 297 – 351 in particular (link below). Read those allegations, noting that (i) the references in [brackets] are to documents Ambase has presumably received via discovery and (ii) the referenced Advance Requests made to lender Apollo likely contained reps as to the accuracy of the information provided therein, and tell me how the Developers can be absolved of any wrong-doing related to their contractual obligations related to the budget and the Equity Put Right. And, to recap, the Put Right, if enforced, calls for a payment of $150mm +/-. But even if not fully enforced, can the Developers really escape without paying Ambase anything with these facts? I think not.

      Link to Proposed Fourth Amended Complaint (FAC):

  34. If a large settlement happens and the stock jumps, does anyone worry about there being a big liquidity problem with everyone trying to sell? I feel like the expected return for us investors should be substantially discounted. I can hardly pick up any shares as it is.

  35. Update from 9/30/20 10Q. Note the section highlighted below, offset by ****. Hard to know what the “settlement” entails and what the timeline for “[satisfaction] of certain conditions” is, but hopefully we find out soon. Overall, the dollars at issue in this particular lawsuit were not huge on a relative basis, but it is conceivable that Custom House has information helpful in some of the other lawsuits against Stern.

    From 9/30/20 Ambase 10Q:
    “AmBase Corp., et al. v. Custom House Risk Advisors, Inc., et al. On April 2, 2020, the Company initiated a litigation in the United States District Court for the Southern District of New York, Case No.◄ 1:20-cv-02763-VSB (the “Custom House Action”). The defendants in the Custom House Action are Custom House Risk Advisors, Inc. and Elizabeth Lowe (collectively, the “Custom House Defendants”). In the Custom House Action, the Company alleges that the Custom House Defendants (a) aided and abetted Sponsor, Stern, and Maloney in breaching their fiduciary duties to the Company by structuring an insurance policy to the personal benefit of Sponsor, Stern and Maloney and the detriment of the 111 West 57th Project and concealing the structure and ownership of the insurance policy from the Company and (b) committed fraud by making material misrepresentations about the terms of the policy to the Company, inducing the Company to contribute additional capital to the 111 West 57th Project to cover the costs of the insurance policy. The Company is seeking damages as well as disgorgement of profits the Custom House Defendants earned from their wrongful conduct. On April 10, 2020, the Custom House Defendants waived service of process. The Custom House Defendants were required to respond to the complaint by June 8, 2020. The Custom House Defendants have not responded to the Company’s complaint. **** In an agreement dated July 31, 2020, the Company and the Custom House Defendants agreed to certain terms for a settlement and entered into a settlement agreement which requires that the Custom House Defendants satisfy certain conditions prior to any dismissal of the Custom House Action. This process is currently ongoing.**** [My emphasis added]”

    You can search PACER for Ambase’s initial complaint under this reference: 1:20-cv-02763-VSB AmBase Corporation et al v. Custom House Risk Advisors, Inc. et al

    • The plot thickens. Thanks as always for mining thru the 10q. I pulled it up but didn’t make it all the way thru before needing to shift my focus back to work. Perhaps this revelation is what is driving the recent buying that has moved the sp to ~$0.30.

  36. Warrant Buffet – in reply to your question dated, 11/16/20:

    I don’t believe the “recourse” would stop at Sponsor. While the Put Right is against Sponsor (as defined), I suggest you review Section 8.7 of the Amended JV Agreement and the Limited Joinder. I would also direct you to the “Seventeenth Claim for Relief – Contractual Indemnification” in the Third Amended Complaint (link in the messages above).

    • Thanks, just getting up to speed here so sorry for making you repeat yourself.

  37. New Ambase reply in Improper Foreclosure Appeal (*Spruce*) filed yesterday 12/7/20:

    The discussion in the 12/7/20 brief of the implied covenant of good faith and fair dealing is instructive when one considers the case against *Sponsor* i.e. Stern and Maloney, and Justice Bransten’s ruling on the Second Amended Complaint (“SAC”) and the Equity Put Right.

    Here is Bransten’s SAC ruling:

    Consider the implied covenant in the context of the additional allegations (compared to the SAC) against Sponsor alleged in the Fourth Amended Complaint (“FAC”) (link to FAC in earlier comment above).

  38. How were 600k shares moved today without tanking the price?

    • I asked a broker and 606,060 traded in a block at $0.33 yesterday. no info on buyer/seller.

      • Actually, I just checked and the seller was Camac Fund (per Form 4). They had purchased IsZo’s block in Dec 2019.

  39. Per Ambase, discovery documents provide “additional evidence of wrongdoing by [Apollo] relating to [Ambase’s] equity put right and the strict foreclosure.”

    In a 1/13/21 court filing in the appeal of a decision in the Apollo (Sr Mezz Lender) matter, Ambase indicates the evidence was found via discovery in the [related] lawsuit against the Jr. Mezz foreclosing Lender (Spruce). The evidence itself is not currently disclosed due to a confidentiality order in the Spruce matter.

    Link to docket in the matter:

  40. Dave, as there have been a number of developments over the last couple of years in Ambase litigation and the initial write-up probably does not reflect the current situation accurately, would you mind sharing a brief update of where we stand currently re ABCP and what is the expected timeline of events going forward (if anything can be said about it).

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