CHICAGO (AP) â€” The Kennedy family has won a fight with an insurance company over the sale of the Merchandise Mart.
A judge ruled Monday that Metropolitan Life Insurance Co. acted in bad faith by demanding a penalty for the prepayment of a $250 million mortgage the Kennedy family obtained from the insurer.
The Kennedy family paid off the mortgage when it sold the 3.7 million-square-foot Merchandise Mart and most of its other real estate holdings to New Jersey-based Vornado Realty Trust for $625 million.
The insurance company demanded $47.5 million, citing a clause in the 1987 loan agreement called a ``yield maintenance'' provision, which is designed to give a lender some benefit of its bargain if the borrower pays off the loan before it matures. Usually, the clause requires the borrower to pay the difference between the mortgage rate and a benchmark rate.
The mortgage agreement between the Kennedys and the insurance company said the benchmark should be a security that ``in the good faith judgment'' of Met Life is ``of comparable investment quality'' to the Mart mortgage. The broadly written formula came about because the Kennedy family and Met Life could not agree on a more exact benchmark.
The Kennedys contended they owed nothing to the insurance company.
``Met Life's conduct, in adopting an approach doomed to failure ... failed all three of the alternative standards for good faith,'' Cook County Circuit Judge Ellis Reid ruled Monday.
Met Life spokesman John J. Calagna said company officials are disappointed with Reid's ruling and are considering several options, including an appeal
Reid ordered Met Life to post a $20 million appeal bond.
Joseph P. Kennedy bought the Merchandise Mart in 1945. When it was sold to Vornado Realty Trust, it was owned by Merchandise Mart Owners LLC, a Kennedy-owned investment company.
Though the Kennedys no longer own the Merchandise Mart, Christopher Kennedy, son of the late Robert F. Kennedy, still manages it as president.