The Real Deal New York

Cuomo opens probe into Rector Square

April 29, 2009 05:06PM
By David Jones

  • Print
alternate textLeft to right: Andrew Cuomo, Rector Square, Yair Levy

New York State Attorney General Andrew Cuomo has opened an investigation into the collapse of Rector Square, the Battery Park City condominium conversion led by developer Yair Levy, according to three officials familiar with the probe.

Sources say that Cuomo, whose office regulates condo and co-op conversions, is issuing subpoenas for financial records related to the 304-unit building, which has been in foreclosure proceedings since early February after Levy defaulted on a $165 million mortgage with Anglo Irish Bank.

Investigators are looking into a possible diversion of funds during the conversion, which collapsed after Levy failed to pay millions of dollars in mortgage payments, construction costs, common charges and PILOT payments to the Battery Park City Authority.

According to documents filed in New York State Supreme Court, Levy’s lawyers have claimed that Levy is “broke,” despite the fact that the developer was collecting more than $150,000 per month from affordable housing tenants at Rector Square and from Beth Parking Corp., a commercial garage tenant at Rector Square.

Officials will also look into the role of Cooper Square Management, which was responsible for collecting rents, managing contractors and performing other key duties at Rector Square while Levy was in charge.

Levy, in a March affidavit filed in response to the Anglo Irish suit, says that Cooper Square withdrew about $300,000 in PILOT payments for the Battery Park City Authority, and used the money for its own management fees. Levy denied that he authorized the withdrawl.

“I never authorized the payment of any of these funds for anything other than the payment of PILOT expenses,” Levy wrote in the affidavit. “My son-in-law, Daniel Deutsch, upon discovery of this improper withdrawal, called Cooper Square, objected thereto and demanded that such funds be returned. Cooper Square never returned these funds.”

Also in the affidavit, Levy says that he and his family invested more than $25 million in Rector Square, and blamed Anglo Irish Bank and Fortress Investment Group, the junior lender, for withholding funds for the conversion.

Cooper Square officials were not immediately available for comment, and a spokesperson for Cuomo did not return repeated calls for comment.  

Meanwhile, lawyers for several dozen condo owners at Rector Square filed a motion in New York State Supreme Court to become a party in the foreclosure suit by Anglo Irish Bank against Levy. Under the motion filed by the owners’ attorney Marc Held, the owners would become defendants in the foreclosure filing, which effectively allows them to be represented along with other named parties, including numerous contractors that have filed liens against the building.

Held argues, in the motion, that any decisions about construction, building sales or other issues made by the receiver, Mark Miller, or the new managing agent, Related Cos., have a direct impact on the unit owners.

Already a dispute has arisen between the unit owners, the receiver and Related over whether the owners should be held responsible for paying common charges dating back to January. Unit owners say they are being asked to pay for those common charges, despite promises by Levy in 2008 that he would pay for several months of common charges upfront. According to the foreclosure suit by Anglo Irish, none of those common charges were paid.

In addition, the receiver has approved the release of about 40 apartments that will be offered at “fair market rents” by Related.

Officials at Related said it was “premature” to discuss any rental prices or specific dates for when the apartments would be available. Miller said though, that the purpose of allowing rentals was to help increase revenue for the building, which saw millions of dollars go unaccounted for prior to the foreclosure filing.

Comments are closed.

MENU

Subscribe to our email newsletters

New York Real Estate News
South Florida Real Estate News