Garrison Special Opportunities Fund, a Manhattan-based hedge fund, alleges that developer Yair Levy threw his stalled Park Columbus condominium project at 101 West 87th Street into Chapter 11 the night before a scheduled Sept. 10 auction to foreclose on a defaulted $20 million mezzanine loan, according to a U.S. Bankruptcy Court filing obtained by The Real Deal.
On Sept. 8, Levy filed to get a temporary restraining order in New York State Supreme Court blocking the foreclosure auction. Garrison officials allege in the filing that Levy failed to come up with a $20 million deposit the following day as demanded by Judge James Yates, in order to block the sale.
After failing to produce the deposit, the filing alleges that Levy threw his YL West 87th Street Holdings entity into Chapter 11 bankruptcy, one night before the scheduled Sept. 10 auction.
Garrison officials called the bankruptcy filing “a sham” and urged a U.S. Bankruptcy Court Judge to lift an automatic “stay,” allowing it to move forward with the foreclosure auction, which would effectively sell the stalled project to a new owner.
“The filing was made in bad faith and was nothing more than a last ditch effort to forestall Garrison’s foreclosure on the collateral,” said Garrison’s attorney Harvey Strickon, in a court filing.
Strickon told The Real Deal: “We’re obviously concerned whether he’s going to maintain the buildings as he’s required to.”
Garrison, originally founded by former Fortress Investment Group executives Steve Stuart and Joe Tansey, acquired the Park Columbus mortgage loan from Arbor Realty Trust in July 2009, according to documents filed with the city Department of Finance.
Garrison already had a $20 million mezzanine loan on the property.
Levy acquired the 95-unit rental building, formerly known as Columbus Green, from Related Cos., for $42.5 million. The deal was part of a larger $165 million agreement that included the acquisition of Parc Place, a Battery Park rental building that Levy converted into Rector Square.
In his Sept. 8 lawsuit in state court, Levy alleged that his previous lender, Arbor Realty Trust, stopped releasing construction funds to him in November 2008. As a result, Levy claims construction stalled and the New York State Attorney General forced him to offer rescission to 16 buyers. AG officials were not immediately available for comment.
Levy alleged that Arbor was facing liquidity problems, and refused to release funds to Garrison. Levy cited Arbor’s $108.2 million net loss in fourth-quarter 2008. Arbor officials were not immediately available for comment.
As The Real Deal first reported, construction has stalled at Park Columbus since December 2008, after construction workers walked off the job and later filed suit for $3.15 million in unpaid mechanic’s liens. Halstead Property Development also filed suit after shutting down the sales office at the building for more than $75,000 in unpaid marketing fees.
The Park Columbus building represents only one of Levy’s troubled condo projects.
Anglo Irish Bank in February filed suit to foreclose on Rector Square, a 304-unit condo at 225 Rector Place in Battery Park City. After months of wrangling in state Supreme Court, the bank recently filed for summary judgment against Levy, which if upheld, would put Rector Square on the auction block.
In August, Levy and investor Serge Hoyda were wiped out of their investments at Sheffield57, the luxury condominium conversion at 322 West 57th Street, after Fortress Investment Group foreclosed on a series of defaulted mezzanine and mortgage loans. Kent Swig, the managing partner at the project, defaulted on hundreds of millions in loans.
A spokesperson for Levy said he would have no comment on the Garrison case.