The Real Deal New York

Rector gets temporary restraining order on Chelsea Bed Bath & Beyond building sale

Suit alleges Levy transferred assets to family

December 19, 2011 03:41PM
By David Jones

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From left: Yair Levy, Rector Square and 620 Sixth Avenue

Rector Square condominium this past Friday obtained a temporary restraining order on the $500 million sale of the Chelsea building home to Bed Bath & Beyond and other real estate assets connected to Yair Levy, in order to collect on a $7.4 million judgment against the embattled developer.

The suit, filed Dec 16 in New York state Supreme Court, alleges the Levy sold off or illegally transferred his real estate holdings after a court found that he illegally raided the Battery Park building‘s reserve fund.

In June, Attorney General Eric Schneiderman banned Levy from selling real estate in New York after a judge ruled that he illegally spent Rector Square reserve fund money on personal expenses. 

Starting in November, the condominium, located at 225 Rector Place in Battery Park City, filed restraining notices against 33 shell companies controlled by Levy.

Meanwhile, according to the new lawsuit, filed in New York State Supreme Court this past Friday, Levy has emptied his bank accounts and transferred real estate assets to his wife and one of his kids, and is scheduled to close on the $500 million sale of 620 Sixth Avenue, between 18th and 19th streets, to RXR Realty by the end of the month. 

“He’s trying to get rid of assets,” attorney Brian Belowich, who represents Rector Square, told The Real Deal.

A court hearing on whether to continue the TRO is scheduled for tomorrow morning before Judge Joan Lobis.

Levy is partners with investors Joseph Chetrit and Charles Dayan at 620 Sixth Avenue, a 700,000-square-foot mixed-use tower that is home to big-box retailers including Bed Bath & Beyond and TJ Maxx. The investors, who bought the property for $290 million in 2005, nearly defaulted on the site years later.

In November 2009, Levy allegedly transferred his 20 percent stake in 620 Sixth Avenue, which operates under the name YL 620 Mezz, to his wife Sony, when the foreclosure and investigation of Rector Square was getting underway.

According to the suit, Levy has also sold or transferred the following real estate holdings:

In November, Levy sold off his Kings Point, N.Y., mansion in a short sale to resolve a lawsuit by Capital One Bank. PropertyShark.com records show a $1.38 million lis pendens on the property from JPMorgan Chase and the Federal Deposit Insurance Corp. dated Aug. 2. The site also shows a 5 percent price cut for property falling from $4.5 million to $4.25 million on July 1.

Court records show that that Levy transferred a 50 percent stake in a penthouse condo at 2025 Broadway to his daughter Galit Levy for “no consideration.” Levy also sold a Miami, Fla., property for far less than its true value.

As The Real Deal first reported, Levy converted Rector Square into condos after buying the property from its original owners Related Cos., who operated the building as a rental property for years. In early 2009, The Real Deal uncovered a number of problems at the conversion project, including construction workers having abandoned the site after not being paid and sales offices that were closed.  

Anglo Irish Bank filed to foreclose on the property, alleging that Levy defaulted on the building’s mortgage and failed to pay taxes, common charges, and payments in lieu of taxes, or PILOT, to the Battery Park City Authority. Levy failed to fund millions of dollars to the building’s reserve fund and spent money on personal expenses like mobile phone charges and credit card bills.

Levy countered that Anglo Irish, which was later bailed out and taken over by the Irish government, shut off his funding before the foreclosure filing due to being overextended, and argued that the reserve fund expenditures were legal and properly accounted for. In August, he filed an appeal of the June decision.  

The current suit alleges that Levy has set up millions of dollars in trusts for his wife and daughters in an effort to shield assets from collection. The condo has asked the court to appoint a receiver to oversee Levy’s assets and administer a proper accounting of his finances and collect money he owes to the condo.

Related, which has since reacquired Rector Square following the foreclosure, is preparing to put apartments back on the market in the spring of 2012.

Levy did not return calls seeking comment. Rex Whitehorn, the attorney for Levy, was in court and not immediately available for comment. RXR officials, Chetrit and Dayan were not immediately available for comment.

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