Baruch Singer took a big hit in New York appellate court last week, as a judge ruled in favor of a mortgagor who claimed $26 million was a fair price for a Hudson Yards development site that Singer lost to foreclosure in 2011, despite protests from the landlord that the property was worth twice that much. Now the new owner, Joseph Chetrit, is looking to score a major profit by selling the site amid frenzied demand on the Far West Side.
The plots in question: 541-545 West 37th Street and 540-548 West 38th Street, a block-through site in the Hudson Yards area that offers more than 370,000 buildable square feet, according to a listing for the property with Massey Knakal Realty Services.
Fortress Credit Corp. bought the property at foreclosure for $2.5 million and subsequently sold it to the Chetrit Group in September 2012 for $26.5 million. The court ultimately used the sale price to Chetrit as a measure of the fair market value of the site at the time.
Now, Chetrit has put the site on the market and is looking to make a handsome profit by riding the Far West Side development wave. While the listing does not specify an asking price, investment sales broker and managing principal of 5Points Group Alan Miller reckons it would be worth between $75 million to $80 million today.
Singer and his counsel, however, say it’s being marketed for north of $100 million, and take that steep price appreciation as evidence that the court’s valuation of the 2011 value was way off.
“Justice [Shirley Werner] Kornreich is a very good judge, but, respectively, we think she got it wrong here,” said Joel Weiss of Katsky Korins LLP, who represented Singer on appeal.“I think that the case was protracted for a long time, it had been on the docket for a long time, and in the end the judge was rushing to get rid of it.”
“It didn’t quadruple in price between now and then,” Weiss continued. “Everyone recognizes that this is a development opportunity in the future. Everyone was saying the value is to tear it down and build a mixed-use property – probably a hotel with residential on top… That was the fundamental approach of both appraisers [at trial].”
Singer said that he has not yet determined whether he will appeal the decision, but believes that the outcome is “obviously” incorrect.
Tuesday’s decision by the New York Appellate Division First Department that the property was worth $25.7 million at the time of foreclosure affirms a July 2014 judgment in favor of Fortress, which sought a deficiency judgment against Singer after foreclosing.
Weiss claims that the court did an “about-face,” by first precluding an investigation of the sale to Chetrit on the grounds that it wasn’t relevant to valuation, but then basing the ultimate judgment on precedent that states a soon-after-foreclosure sale can be relied upon as fair market value so long as it meets certain terms. Because the sale was not investigated, Weiss said, there is no proof that it was an arm’s length deal.
“The property was clearly worth the $50 million,” Weiss said, referring to an appraisal submitted at trial by Landauer Valuation & Advisory’s chairman Robert Von Ancken that valued the property at $49 million at the time of the 2011 foreclosure.
An attorney for Fortress, however, disputed that claim, saying that the market has changed dramatically since the time of foreclosure.
“The issue at trial was — what was the property worth in September of 2011?” said Mitchell Haddad of Sills Cummis & Gross. “It didn’t matter what the value was in 2013 and it doesn’t matter for the purpose of our trial was the value is today… The market spoke.”
Massey Knakal’s Robert Knakal testified as an expert for the prosecution at the trial, saying that Chetrit’s $26.5 million offer was indeed the fair market value and the highest bid the site garnered. Richard Marchitelli of Cushman and Wakefield also testified for the prosecution.
Chetrit originally planned to develop the site and filed for demolition permits in early 2014. While the listing is online, it appears without an asking price, and representatives from Massey Knakal and the Chetrit Group did not respond to requests for comment.