Yair Levy and Park Columbus condominium at 101 West 87th Street on the corner of Columbus Avenue

Garrison Special Opportunities Fund, a Manhattan-based hedge fund, alleges that developer Yair Levy threw his stalled Park Columbus condominium project at 101 West 87th Street into Chapter 11 the night before a scheduled Sept. 10 auction to foreclose on a defaulted $20 million mezzanine loan, according to a U.S. Bankruptcy Court filing obtained by The Real Deal. On Sept. 8, Levy filed to get a temporary restraining order in New York State Supreme Court blocking the foreclosure auction. Garrison officials allege in the filing that Levy failed to come up with a $20 million deposit the following day as demanded by Judge James Yates, in order to block the sale. After failing to produce the deposit, the filing alleges that Levy threw his YL West 87th Street Holdings entity into Chapter 11 bankruptcy, one night before the scheduled Sept. 10 auction. Garrison officials called the bankruptcy filing “a sham” and urged a U.S. Bankruptcy Court Judge to lift an automatic “stay,” allowing it to move forward with the foreclosure auction, which would effectively sell the stalled project to a new owner. [more]

Developer Kent Swig and Sheffield57

Former Sheffield57 developer Kent Swig filed an appeal to the New York State Appellate Division to overturn a $28.4 million judgment issued in July on behalf of Square Mile Structured Debt, a firm led by investor Jeffrey Citrin. In court papers filed earlier this year, Square Mile alleged that Swig defaulted on a $21.15 million personal loan issued in July 2007 to help finance the development of Sheffield57, a converted condominium at 322 West 57th Street. Swig, in court records filed late last week, argues against the judgment, stating that the loan was to be converted into a stake in Sheffield57, and not be repaid in cash. [more]

The Sapir Organization’s 100 Church Street, which SL Green Realty took over last week, is slated to be sold at auction Oct. 15. SL Green controls most of the mezzanine debt on the property, sources told Crain’s. SL Green has hired Eastdil Secured to solicit interest from potential auction bidders. But in previous similar cases, such as Fortress Investment Group’s purchase of Sheffield57, the lender has ended up purchasing the property at auction. [more]

Mezzanine lenders are swooping in to seize control of an increasing
number of properties when owners fall behind on mortgage payments.
Fortress Investment Group foreclosed on Sheffield57, and Normandy Real
Estate Partners and Five Mile Capital spent nine months buying up
discounted debt so that they could foreclose on Boston’s John Hancock
Tower and a building in Los Angeles. In Manhattan, more foreclosures
are likely, with 130 troubled properties worth $7.5 billion, according
to Real Capital Analytics. But foreclosures are complicated because
many buildings have tiered financing, and each lender has some rights
to a building. [more]

Investors are returning to the Manhattan real estate market to pick up property at a discount, according to WNYC’s Lisa Chow. In addition to Fortress Investment Group’s purchase of Sheffield 57 at auction last week, a unit of Canada’s largest pension fund purchased 1330 Avenue of the Americas. A private equity firm purchased 1540 Broadway. Experts expect to see more of these kinds of sales, which are occurring at 40 to 50 percent discounts.

From left: Kent Swig, Yair Levy, Serge Hoyda and Sheffield57

Following two months of legal challenges and financial turmoil,
Fortress Investment Group acquired the controversial Sheffield57
condominium for a mere $20 million during this morning’s foreclosure
auction. Fortress, a Manhattan-based hedge fund that previously acquired more
than $100 million in defaulted Sheffield loans, made the lone bid at
the auction, giving it total control over the 322 West 57th Street
holding company. Out of the few dozen attendees, there were only two
other registered bidders and neither made an offer for the building. The sale, arranged by Eastdil Secured and held at the Midtown offices
of Allen & Overy, the law firm representing Fortress, is considered
a minor miracle for developer Kent Swig, who struck a June agreement to
bring in the hedge fund as a white knight.  More

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Kent Swig, Yair Levy, Serge Hoyda

A state Supreme Court judge has agreed to hear arguments July 20 to block the auction of the Sheffield57’s senior mezzanine debt and force Fortress Investment Group and developer Kent Swig to answer questions under oath. Lawyers for Yair Levy and Serge Hoyda, the majority investors at the luxury condominium, asked Judge Bernard Fried to order an injunction blocking the auction, the release of all documents related to the loan agreement and the chance to depose Swig and Fortress about the terms of the debt sale. “He’s going to consider my request for expedited discovery,” said Stephen Meister, lead attorney for Levy and Hoyda. “There will be a hearing to determine whether to issue an injunction restraining [Fortress] from committing a [non-judicial] foreclosure sale.” Meister claims that the agreement between Swig and Fortress would allow the developer to retain some equity in the project, while wiping out the equity stake held by Levy and Hoyda, who own about 70 percent of the Sheffield57 condo. [more]

Just weeks after Fortress Investment Group filed to foreclose on a $70
million mezzanine loan at Sheffield57, a state Supreme Court judge is
set to hear arguments by investors Yair Levy and Serge Hoyda tomorrow
morning to appoint a receiver at the troubled condominium. In a June lawsuit, Levy and Hoyda alleged that developer Kent Swig
misappropriated more than $50 million in construction funds at
Sheffield57 and made critical decisions about the condo conversion
without their consent or approval. Levy and Hoyda, who control about 70 percent of the building ownership
[with Swig and other investors controlling the remaining interest],
claimed the foreclosure would wipe out their $17 million investment in
the building. [more]

Fortress Investment Group is
expected buy Kent Swig’s troubled Sheffield57 project through a
foreclosure proceeding, according to two people familiar with the
transaction. The Real Deal reported earlier this month that Swig was
rushing to sell the senior mezzanine debt to Fortress. If Fortress buys
Sheffield57, it will be the third high-profile foreclosure by a
mezzanine lender in the US. this year, following auctions of 1330
Avenue of the Americas and the John Hancock Tower in Boston.
Spokespeople for Fortress and Swig declined to comment, according to Bloomberg. [more]