The auction of developer Yehuda Leib Puretz’s stalled Waterfront Commons mall site in Staten Island was canceled yesterday, a day after his firm filed the $90 million project into Chapter 11 bankruptcy protection.
The Brooklyn-based developer, who was planning the 380,000 square-foot mall in the Richmond Valley section of Staten Island near the Outerbridge Crossing, defaulted on a $21.5 million loan connected to the project after the economy stalled in 2008, sources said.
“It [was] largely just a factor of the economy,” said Andrew Boyle, a consultant on the project and COO of the Boyle Group, based in Malvern, Pa.
After buying the undeveloped tract on the Staten Island waterfront for $4.5 million in 2006, the developer planned an outlet mall with more than 60 stores, a 14-screen movie complex, restaurants and underground parking.
Court documents and PropertyShark.com records show a $27.5 million judgment was entered against the 345 Richmond Valley Road property Jan. 20 and an auction of it was announced a month later.
According to the March 8 filing in U.S. Bankruptcy Court, the entity that owned the property, Arthur Kill Hillside Development, reported liabilities of between $100 million and $500 million, but did not report assets, which are required in bankruptcy filings.
The filing was signed by Toby Luria, listed as a partner of Bnai Pertz, which sources say is one of the partners in the entity that owns the mall. Court records show the developers were issued a deficiency notice, which means that several of the required documents were not part of the filing, including the list of the top 20 unsecured creditors, a statement of financial affairs and an affidavit from the debtor.
Lawyers for the lender declined to comment, but lawyers for the developer said they hoped to use the bankruptcy process to work out a deal with the lender.
“What every debtor hopes to do is work out a deal with their lender in bankruptcy court,” said attorney Bruce Weiner.
Analysts say that bankruptcies like this are a frequent tactic to force a lender into negotiations on the eve of an auction.
“He’s going to buy a couple of months either to negotiate his way out or to negotiate more time,” said Sam Heskel, executive vice president of HMS Associates, an appraisal firm.
Puretz has been one of the biggest developers in Staten Island and ran into difficulty with several of his projects.
As The Real Deal previously reported, the notes on two of Puretz’ residential projects were sold in June 2010 for $23 million, or nearly half the $54 million face value. A firm called Meadow Partners acquired the notes for the Pointe, a 57-unit condo at 155 Bay Street Landing and the Pearl, a 101-unit residential conversion at 130 Bay Street landing.
The lender for the Waterfront Commons project, Garrison Special Opportunities Fund, put a 16-story waterfront condominium called Liberty Towers on the block through Massey Knakal Realty Services late last year after Puretz defaulted on that loan.
A court hearing on the shopping mall case is scheduled for April 28 at U.S. Bankruptcy Court in Downtown Brooklyn.