The Real Deal New York

Final rescue plan at One Madison expected within week

April 28, 2011 04:02PM
By David Jones

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HFZ Group principal Ziel Feldman’s presentation of a final rescue plan at One Madison Park is expected within a week, The Real Deal has learned, after he emerged as the leading bidder in a bankruptcy auction earlier this month.

Sources say the court approved another extension by the debtors, which would move the official disclosure of the plan to mid-May at the earliest, and possibly into June.

Feldman, who has been working for months behind the scenes to help move the project through bankruptcy, submitted a winning bid that would pay about $165 million to get the project out of bankruptcy court and would need at least $40 million to complete construction of the luxury tower, located at 23 East 22nd Street in the Flatiron area, according to sources familiar with the discussions.

Lawyers representing various parties in the case are awaiting formal submission of the plan, which would have to satisfy both the interests of the secured lenders that hold debt secured by the condominium and unsecured creditors that are owed millions in unpaid loans, contracts and other expenses.

“A judge has to decide whether the proposed plan is feasible,” said one legal source who asked not to be identified.

Feldman has been on somewhat of a buying spree with distressed properties in New York. Earlier this month, HFZ and Israel’s Acro Group reached a deal to buy the debt at the Setai condo at 40 Broad Street for $80 million.  

It is not clear who Feldman’s financial backers are on the One Madison Park plan, but sources say that HFZ is working with additional investors on it.

Feldman beat out several major players at One Madison including Ian Bruce Eichner, chairman of Continuum Company, and Atlanta-based Invesco.

Eichner said that he felt the market could not support the prices being discussed to get a complex real estate deal out of bankruptcy, then completed and sold.  

“The numbers… were greater than what I thought made economic sense,” Eichner said. “I did not bid at that level.”

Ben Thypin, senior market analyst at Real Capital Analytics, said the proposed plan would require the new investors to sell condo units at well above $2,000 a square foot to be profitable, and closer to $3,000 for some units, which would be difficult in the current market.

“I think it’s extremely unlikely they could sell all the units at an average price per square foot at that level,” he said.

Eichner once had high hopes of coming in with his own plan to rescue the property from bankruptcy court, but Shapiro was sued by investor Cevdet Caner who alleged that Shapiro was making unilateral decisions without the approval of his financial backers. Caner obtained the voting rights of Shapiro’s partner Marc Jacobs, and then got a court to force Shapiro to get unanimous backing for any agreements he entered into.  

Sources say the winning bidder would not only have to work out an agreement with secured and unsecured creditors, but would have to complete a new lobby that would give residents access on 22nd Street. Currently about 12 units in the 69-unit building are occupied and residents have to enter the property through a temporary entrance on 23rd Street that is designated as a commercial space.

The developers are also facing a lawsuit from a neighbor who alleges Shapiro promised to buy the next-door property and also forged the signature of Abe Shrem, misrepresenting himself as representing 26 East 23rd Street, without the knowledge of the parties.

Shapiro got a waiver that allowed him to extend a flue pipe, which is basically a heat exhaust, onto the next-door property. The plaintiffs want the flue moved off their property.

Shapiro denied the allegations and said that there are alternate locations to move the flue on the property.

“He was fully aware of all of the activities on the site,” Shapiro said.

Feldman declined to comment and lawyers for Shrem were not immediately available for comment.

Meanwhile, Jonathan Newman, the court-appointed receiver in a foreclosure case against One Madison that was initiated by iStar Financial, filed a motion to be discharged, saying he has completed his duties and that the One Madison investors have appointed John Fioretti to oversee the property.

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