From left: One Madison Park, Stephen Ross of Related and Ziel Feldman of HFZ Capital Group
Related and HFZ Capital Group cleared a key hurdle in their effort to take over the beleaguered One Madison Park condominium tower on Thursday, after the deadline for parties to file competing bids passed with no additional offers.
Related, through an entity known as One Madison FM, had initially been HFZ’s rival to become the sponsor of the 50-story tower at 23 East 22nd Street, which creditors pushed into bankruptcy in June 2010. But in September, Related and HFZ joined forces to bid for control of the property through a bankruptcy auction, which had been scheduled for Dec. 13.
The lack of competing bids allows the entity that controls One Madison, FKF Madison Group Owner LLC, to move ahead with Related and HFZ’s proposal to pull the 69-unit property out of bankruptcy. But, it denies One Madison’s other creditors a chance at greater recovery from more lucrative bids. Together, Related and HFZ hold all of the property’s secured debt, some $234 million worth, according to court documents.
“It would have been nice to have some more bidding that would have driven up the value and potentially increased the return to creditors,” said Derek Abbott, an attorney for the One Madison entity. “But at end of they day, we filed this plan because we thought it was the best alternative under the circumstances.”
As previously reported, the building could change hands as early as February, with condos hitting the market later in 2012. But the proposal is still subject to the approval of a U.S. Bankruptcy judge in Wilmington, Del., and could face objections from the remaining creditors, who collectively hold between $160 million and $180 million in debt, according to court documents.
Additionally, an ongoing ownership dispute over contracts for 16 of the units could tie up proceedings.
Related and HFZ’s proposal, the second one under consideration, calls for the developers to provide unsecured creditors with a $6.75 million payout, divided on a pro rata basis, court documents show. (That amount could drop to $3.4 million if the creditors challenge the plan.)
Previously, developers Ira Shapiro and Marc Jacobs had closed 12 sales at the building. At least two of the current owners have opted to rent out their units, although construction has been stalled for months and amenities such as a gym, pool and rooftop space have yet to be completed.
Joshua Gleiber, an executive vice president at Jones Lang LaSalle, oversaw the solicitation of competing bids. Through a spokesperson for the firm, he declined to comment, as did Related and HFZ. An attorney for the unsecured creditors did not immediately return a request for comment.