The Real Deal New York

Apthorp waived rights on loan sale, missed sales targets, made false statements: Anglo

September 30, 2011 02:19PM
By David Jones

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Anglo Irish Bank said in a court filing yesterday that the developers of the Apthorp condominium, on Manhattan’s Upper West Side, gave the lender the right to sell the property’s $385 million mortgage to a third-party by waiving a “no-assignment” clause in the loan agreement, and later defaulted on the loan by failing to meet sales targets.

The Apthorp developers, led by billionaire Lev Leviev’s Africa Israel USA, filed suit in state Supreme Court earlier this month asking a judge to block the sale of the loan to Dallas-based Lone Star Funds, claiming the transfer would threaten the viability of the project by creating uncertainty in the market, which would cut into sales.  

Anglo Irish is selling the debt as part of a massive restructuring to exit the U.S. commercial real estate market. The lender is selling its entire $9.5 billion American commercial loan portfolio, and the Apthorp loan sale is part of a $5 billion sale of nonperforming and sub-performing loans to Loan Star. JPMorgan Chase and Wells Fargo are buying the bank’s remaining bucket of performing loans.  The building, at 2211 Broadway, has been one of the biggest and most troubled loans in the Anglo Irish portfolio since original developer Maurice Mann agreed to buy the building in 2006.

The developers claim that as part of the deal to restructure the loan in 2010, Africa Israel agreed to retain 51 percent of the loan. But the lender claims in sworn statements that it specifically got permission to sell the loan to a third party, and that Africa Israel and mezzanine lender Area Property Partners negotiated for the right to bid on the loan in the event of an auction. The Wall Street Journal previously reported that Area made a bid on the Apthorp loan during the sale of the U.S. portfolio, but dropped out. The senior loan had a balance of $224.9 million on Sept. 3, according to court documents.

“As I explained to the parties, including Apthorp’s representatives, that this term was essential as Anglo was itself restructuring and preparing to potentially exit the United States market,” said Paul Brophy, executive vice president of Anglo Irish and head of the New York office, in the affidavit dated Sept. 29. “The concept of Anglo holding a majority interest in the loan was never contemplated.”

He said that under the restructuring deal, the Apthorp developers had to sell 13 units at the condo, valued at $50 million, by June 30, 2011, but they failed to do so despite a bulk sales deal that the developers claimed were sufficient. Including the missed sales, the Apthorp needs to hit 16 unit sales for $68 million by the end of the year, Brophy said in the affidavit.

Lawyers for the Apthorp told The Real Deal earlier this month that the developers never went into a mortgage default, but conceded that the property may have missed sales targets.

Anglo Irish, citing a story in The Real Deal earlier this month and documents filed with state regulators, further allege that the developers have made false statements either to the court or to Attorney General Eric Schneiderman regarding the impact the loan would have on the condo conversion, court filings show.

“As part of its misguided effort to gain leverage over Anglo, plaintiff now states under oath that both it and the project will be irreparably harmed if Anglo is permitted to sell the loan as it is permitted to do under the agreement,” attorney Maja Fabula wrote in court documents filed yesterday by the lender. “Only one thing can be said for certain about plaintiff: it has falsely presented its position to at least one branch of New York’s government. Now these falsehoods have come home to roost.”

A spokesperson for the Apthorp said, “the owners will have no comment on pending litigation.” Area, which holds a $135 million mezzanine loan at the site, was not immediately available for comment. Lonestar, the AG and lawyers for Anglo Irish declined to comment.

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