A State Supreme Court judge has ordered the sale of a historic East Village art studio and former horse auction house, after two new investors, Isaac Mishan and Joseph Sabbah of Ultimate Realty, failed to gain approvals for a proposed condo project and defaulted on $10.5 million in loans.
State Supreme Court Justice Eileen Rakower ordered the sale of the property in a Jan. 23 ruling, after the developers lost a foreclosure suit filed by Bank of Smithtown, which later sold the loan to Manhattan-based Infinity Capital Management.
The 11,800-square-foot Beaux Arts building at 126 East 13th Street, originally built in 1904, housed the Van Tassel & Kearney Auction Mart, one of the city‘s top sellers of horses and horse-drawn carriages. Prior to World War II, the building was used as a machine shop, and would continue to operate as such until the late 1970s, when famed sculptor Frank Stella converted the building to an art studio.
Mishan planned to demolish the site to develop a seven-story residential condominium, but local preservationists, led by the Greenwich Village Society for Historic Preservation, launched a major campaign to rescue the property and forced an emergency hearing before the city Landmarks Preservation Commission.
“128 East 13th Street can be preserved and honored for its remarkable contributions to our city’s history and development, or it can be destroyed to make way for a slightly more profitable but infinitely less remarkable building,” said Andrew Berman, executive director of the society, in 2006 testimony before the LPC.
A $9 million loan was originally scheduled to mature in 2006, was extended three times, and according to the July 2009 lawsuit by the bank, the developers defaulted after failing to make a $59,000 payment in July 2009.
At the request of the bank, the judge appointed a receiver to oversee the property and leased the space to a dance studio called Peridance Capezio Center.
Sources familiar with the property say the loan on the project was shopped extensively to potential investors, but the debt failed to move for many months due to a complicated series of legal and regulatory entanglements. By July 2011, the debt was sold to Infinity Capital Management, operating through an entity called White Knight NYC Holdings, which was then assigned to Manhattan-based Property Markets Group. That entity has taken over from Bank of Smithtown as the plaintiff in the case.
Sources say that PMG will likely acquire the property through a so-called credit bid process, which allows the holder of the debt to buy the debt unless another bidder pays above the value of the existing loan balance. It is not clear what the debt holder plans to do with the building, but that will likely depend on whether the building is landmarked.
“The commission plans to bring the building forward for a designation vote in June,” LPC spokesperson Elizabeth de Bourbon told The Real Deal, in an emailed statement.
Neither infinity officials, Berman nor the developers were immediately available for comment.