The Real Deal New York

Leviev planned to market Apthorp for $552M

December 31, 2008 12:39PM
By David Jones

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Israeli real estate mogul Lev Leviev floated a plan in November to put the struggling Apthorp condominium conversion up for sale for more than $550 million, according to court records reviewed by The Real Deal.

Leviev claimed in the court documents that the Apthorp board of directors agreed to hire CB Richard Ellis to sell the building for $552 million and that managing partner Maurice Mann rejected it. Mann’s lawyer told The Real Deal there was no such agreement and that putting a distressed asset up for sale would make it impossible to sell condos.

In addition, Leviev, who owns half of the Upper West Side building, wants to have Mann removed from the conversion, alleging that he not only rejected the plan, but has also engaged in excessive spending and illegally “warehoused” apartments at the building, according to court records. The Leviev emergency injunction filing was first reported by the Wall Street Journal.

Leviev was out of the country and not immediately available for comment.

One week ago, Leviev urged the New York State Supreme Court to place the Mann dispute before a rabbinical arbitration board, called the Beth Din of America, in order to prevent the building from going into foreclosure.

Mann, a veteran New York developer, agreed to buy the apartment building at 390 West End Avenue, for a record $426 million in 2006 at the height of the market. Leviev later stepped in to become his partner in the investment, and the two agreed to convert the 163-unit rental building into one of the most expensive condominiums in the city, selling for more than $3,000 a square foot.

In March 2007, Anglo Irish Bank agreed to provide a $393 million first mortgage and Apollo Real Estate Finance Corporation, a unit of Apollo Real Estate, agreed to provide $135 million in mezzanine financing, which would help finance the deal and provide for a $95 million renovation.  

Amid slumping sales, Mann filed a $500 million suit against Anglo Irish Bank, Apollo, Petra Fund REIT and Guggenheim Structured Real Estate claiming that Apollo wrongfully declared the loan out of balance and tried to force him into making a $22 million “ransom” payment to keep the building out of default. He alleged that Apollo Real Estate was a rival bidder for the Apthorp in 2006, and wanted to use this opportunity to snatch the building away from him. When asked about his relationship with Leviev earlier this month, Mann told The Real Deal, “It’s a business relationship,” without elaboration.

Mann’s attorney Theodore Steingut said the Leviev allegations are “completely without merit,” adding that placing the building up for sale in November would have been “suicidal” in the current economic climate.

Steingut said there was no warehousing of apartments, that certain employees were allowed to live in the building because they were needed for the renovation work and that there was a provision in Mann’s agreement with Leviev for a rabbi from the Beth Din to settle the dispute.

The Apthorp was acquired for $2.6 million per unit, which was a record price for New York real estate. Under the Martin Act, the conversion was a non-eviction plan, which meant that the new owners could not legally evict more than 80 rent stabilized tenants, some who were paying less than $1,000 a month.
 
Tenants say the owners have since gone after rent-stabilized tenants with frivolous lawsuits, claiming that the building is not the primary residence of some tenants, and making other claims that are a bit more creative.

“There was a lawsuit against a woman on [the top floor],” recalled Ron Blumer, president of the Apthorp Tenants Association. “She put some plants outside of her window and they claimed she infested the building with ants. The judge laughed them out of court.”

Steingut, Mann’s attorney, denied that there were any “improper” measures taken against tenants.

So far, sales have been slow. Court records indicate that the Apthorp had one contract signed in early December for $6.1 million and had contracts out for two additional sales.

Streeteasy.com says there are eight apartments at the Apthorp on the market at prices ranging from $3.45 million for a 1,750-square-foot, two-bedroom unit, up to $15.5 million for a 6,197-square-foot, five-bedroom apartment.

There is a January 9 deadline to reach an agreement with the lenders.

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