The Real Deal New York

Bank wins foreclosure suit against Levy at Rector Square

January 21, 2010 07:31PM
By David Jones

A New York State Supreme Court judge shut the door on developer Yair Levy in the highly publicized foreclosure at Battery Park City’s Rector Square condominium.

Judge Joan Madden awarded summary judgment this afternoon to Anglo Irish Bank, which filed to foreclose after Levy’s firm defaulted on a $165 million mortgage loan. Madden rejected Levy’s arguments that the bank subverted the project by cutting off funding, and noted numerous defaults by Levy’s YL Real Estate, including improper withdrawals from the emergency reserve fund and “questionable” requests for construction money.

“Anglo further alleges that at least one contractor has accused YL of pocketing some of the loan proceeds and that YL embezzled most of the tenant reserve funds,” Madden wrote in her decision.

Levy himself filed suit in state Supreme Court, alleging the bank forced the project into bankruptcy by shutting off his construction funds.

Levy was not immediately available for comment, nor was YL Real Estate attorney David Segal. Christopher Sullivan, an attorney representing Anglo Irish Bank, was also not immediately available.

The Real Deal broke news of the troubled condo in January, after the sales office led by superbroker Michael Shvo suddenly shut down and contractors walked off the job with renovations half finished. 

By early Feburary, Anglo Irish Bank filed to foreclose on the property. Levy was accused of using certain apartments for extended-stay hotel guests and selling a block of apartments to an Italian university for their exchange students.

Nearly 50 people had bought condos and moved into the 304-unit building prior to the February foreclosure suit. A group of affordable housing tenants also lived in the building. The building has operated under a receiver since Feburary, with Related Companies brought in to manage the property and complete the renovations. Related owned the building prior to a 2005 sale to Levy.

In November, unit owners filed a $100 million suit against Levy, Shvo and former management firm Cooper Square Realty, alleging they committed fraud, negligence and misrepresentation. 

“While it is not a surprise that the court has granted Anglo Irish Bank’s motion to foreclose the sponsor’s interest in the property, the unit owners of 225 Rector hope that the bank and any future owners of the sponsor’s units will consider and respect [the unit owners] interests and legal rights as we move forward,” said Marc Held, attorney for the unit owners.

Earlier this week, Levy failed in his attempt to block the foreclosure of Park Columbus, another condo project at 101 West 87th Street. Levy acquired that property in the same 2005 acquisition deal from Related.

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