A German bank claims the developers of the year-old, sleek, 21-story Cooper Square Hotel in the East Village are in default on $52 million in loans, at the same time the building owes millions to contractors.

Not only is the project in financial distress, but developers and investors in the 145-room hotel at 25 Cooper Square at East 5th Street could owe as much as $6 million in personal guarantees, the recent lawsuit says.

Commercial lender WestLB filed to foreclose on $52 million in loans given to Cooper Square Hotel, Cooper Square Mezz Lender and seven individuals including the hotel’s co-developer Matthew Moss and real estate investor Kyle Ransford, a lawsuit filed Dec. 14 in New York State Supreme Court says.

In addition, at least 20 contractors have filed mechanic’s liens totaling $9.9 million on the project between June 2009 and Dec. 18, records from the New York County Clerk show. The largest single lien, for $5.8 million, was filed by contractor F.J. Sciame Construction on Aug. 21, the records show.

Moss, Ransford and investor Gregory Peck are in default on a completion guarantee, and collectively owe up to $6 million, in part because of the unpaid liens, the suit says. [more]

Africa Israel Investments said today it will cut its debt on the 15-story New York Times Building at 229 West 43rd Street by roughly 60 percent after reaching a deal with its creditors. The developer paid $525 million for the Manhattan property in 2007, taking out $715 million in loans in order to convert the building, where its namesake newspaper was headquartered until 2004, into a mixed-use complex including an upscale hotel, apartments and retail space. The building now stands empty after the economy cratered and the project was abandoned. Africa Israel’s debt stood at $652 million on the property prior to the deal, which will reduce it to $267 million, and provide the company with a credit line of $75 million. The deal stipulates that Africa Israel surrender 50 percent of its rights to the building. The company said it will use another $25 million to develop the property and will pay back the remaining debt within five years. Yesterday, the company reached a deal with its corporate bondholders to restructure $2 billion in debt, which is pending final approval next month. [WSJ]

Lev Leviev is looking to appease his company’s creditors in order to avoid putting his embattled Africa-Israel company under bankruptcy protection. After months of trying to restructure $2 billion of the company’s debt, Leviev is now offering up $200 million of his own funds and a hefty portion of his stake in the company order to stabilize Africa-Israel, according to a Dec. 2 filing in an Israeli court. Leviev’s high-profile investments, such as One Madison Avenue, the Clock Tower building in Manhattan, bought for $200 million at the height of the market in 2007, and the New York Times headquarters, purchased for $525 million around the same time, led to his downfall, according to Bloomberg. “Hubris was Leviev’s sin,” Micha Cherniak, CEO of Lehava Investment, said. “He stopped listening to the managers he hired and began calling all the shots, focusing on an aggressive expansion of the company.”

From the October issue: As the real estate industry scrambles to unwind billions of dollars in
distressed inventory, a number of high-profile deals are stuck in
neutral as lenders battle it out with each other to see who will get
paid and who will be left holding the (empty) bag. While creditors often turn on each other during a workout, the massive
number of securitized loans with multiple lenders and third-party
servicing firms managing the funds is creating a level of complexity
that may take years to sort out, analysts said. Unlike the previous downturn in the 1990s, the majority of large deals
during the recent real estate boom were made using securitized loans –
or at least loans with large syndicates, or groups of lenders sharing
the burden of a single loan.

Lev Leviev’s Africa Israel Investments is trying to restructure 21 billion shekels, or $5.5 billion, worth of debt. The company has paid off 3.3 billion shekels of loans since the beginning of 2008, but it still has 7.5 billion shekels of debt left to pay off, it said. Leviev told Bloomberg the company’s biggest mistake was its U.S. investments, which include the former New York Times building, purchased for $525 million in 2007. The company’s stocks dropped in response to the restructuring announcement.

Lev Leviev (left) and the former New York Times Building

A private equity firm that helped fund the $525 million purchase by Lev
Leviev’s AFI USA of the former New York Times Building in 2007 is
accusing the buyer of scheming to wipe out the lender’s $79 million
mezzanine position. The mezzanine lender, Stamford-based Five Mile Capital Partners,
charged in a 30-page breach of contract lawsuit that AI Holdings (USA),
a subsidiary of AFI USA, is overstating a loss in value of the building
to trigger a technical default that would permit the senior lender,
Banco Inbursa of Mexico, to foreclose on the property. The property value was marked down from $690 million following the
purchase to $315 million as of December 2008, the filing says, creating
the event of default.  More

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