For developer Yair Levy, real estate is Act II. After emigrating
from Israel in 1972, at age 22, the current president of YL Real Estate
teamed up with his brother in the garment business, and established
himself as a presence in the fashion world by creating a successful
line of women’s sportswear. Levy sold the apparel line, which was
called the YL Collection, to several department stores.
In a 2007 interview with The Real Deal, he noted that his work in the garment industry helped him develop an eye for real estate.
“You are always looking for good retail locations, so that gave me
a sense of what’s going on in the real estate industry,” he said at the
Until recently, his sense was good.
The man who borrowed against his home to finance his first real
estate purchase in Lower Manhattan in 1998 (at a distressed development
site at 133-135 Greenwich Street) eventually scored a string of
profit-making deals, starting with low-value assets. In fact, in recent
years, Levy was even dubbed New York’s “condo king” by some media
outlets after developing several Lower Manhattan sites.
“He recognizes value,” said Edmond Levy (no relation), principal at
Cornerstone Property Group, which brokered Yair Levy’s 2005 Greenwich
However, his professional unraveling began to publicly reveal
itself in October when Levy was charged in a bizarre incident where he
allegedly assaulted Kent Swig, the president of Swig Equities, with an
ice bucket after the two got into a fight over one of their failed
What was not known at the time was that Levy was beginning to run
out of funds leading up to the collapse of one of his biggest deals,
the conversion of Rector Square at 225 Rector Place in Battery Park
City, which has now devolved into a headline-grabbing fiasco.
In February, Anglo Irish Bank filed suit to foreclose on Rector
Square, alleging that Levy defaulted on $165 million in loans and on
millions in other payments. For Levy, who did not respond to repeated
interview requests, the foreclosure of Rector Square may be what
defines his legacy in New York real estate.
Michael Miller, the court-appointed receiver at Rector Square, said
he’s been flooded with invoices from various contractors who have not
been paid in months. And, along with lawyers for the homeowners and
tenants, he said Levy has informed the court that he has no funds to
cover outstanding expenses.
“I have spoken with a lot of folks who have experience in this
field,” said Miller, “and they have never heard or seen anything like
Before the bust
Levy grew his business by networking with a number of fellow
immigrants who entered real estate from the garment trade, as well as
trusted family members. His relatives (including his son-in-law, Dan
Deutsch, a former Reuters executive who joined Levy at YL Real Estate)
were often the public faces of the firm while Levy made deals in the
Levy’s Greenwich Street purchase, which he bought out of
foreclosure by assuming the existing debt, was the first in a series of
distressed sites that he turned a profit on. Levy sold the property to
the Cooper Group, an Israeli investment group, for $20 million in 2005.
Another of Levy’s early successes was a partnership with investor
Ezra Mashaal of the Kash Group, which converted a 50-story,
80,000-square-foot former office building at 29 John Street into a
Meanwhile, further uptown, Levy acquired a development site at
302-316 Third Avenue with fellow real estate investor Serge Hoyda for
about $33 million. The deal proved to be one of Levy’s most lucrative,
when it sold for a whopping $85 million.
The Hoyda partnership was critical to Levy’s emergence as a major
residential developer in New York. In 2005, the duo teamed up again and
joined forces with Swig to acquire the Sheffield, a luxury rental
building on West 57th Street, for $418 million. At the time, the deal
marked the biggest acquisition of a single residential building in the
Levy had actually teamed up with Swig earlier that year, along with
investor Charles Dayan, to buy a couple of small tenement buildings on
West 92nd Street for $54 million.
While the terms of Sheffield and the West 92nd Street deals
diverged wildly, to some they signified the beginning of the
residential condo boom. They would also result in epic battles between
the sponsors, tenants and anti-development activists.
At 92nd Street, the trio of developers planned to convert a pair of
six-story rental buildings into a mixed-use condo by erecting nine
additional stories on top of the two buildings. As The Real Deal
reported last year, the sponsors planned to rent the 134 existing
apartments, and sell 56 new condos, for a total of $145 million.
The deal was financed in March 2005 with a $52.49 million
acquisition and development loan from Fremont Bank, one of the
country’s top subprime lenders.
Tenants and community activists fought the proposal tooth and nail,
arguing that it posed safety hazards and that profit projections were
above what the market could support. As a result of the opposition, the
city’s Department of Buildings reversed course and ended any chance of
a viable conversion.
As the plan went south, Levy began to sour on Swig, who was taking
the lead on negotiations with both tenants and city officials. By the
summer of 2007, Levy secretly started working with Dayan to make an end
run around Swig, sources said.
“He tried to sneak around Swig and tried to make a deal with the
tenants themselves,” said Assemblywoman Linda Rosenthal, a leading
critic of the 92nd Street conversion.
By January 2008, iStar Financial, which had acquired Fremont’s
commercial real estate portfolio, filed to foreclose after the partners
defaulted on mortgage payments. The buildings were later sold.
Meanwhile, at the Sheffield, the sponsors lost a court decision to
evict more than two dozen market-rate tenants, which contributed to
significant delays in the conversion. By the fall of 2008, contractors
had filed millions of dollars in liens against the building, and the
major rating agencies placed the building on a 2008 watch list amid
concerns about Swig’s ability to refinance.
Documents obtained by The Real Deal show that Swig, who
declined to comment for this story, has two six-month options to extend
the deadline. Dayan was not immediately available.
While Levy watched his two residential projects with Swig fall
deeper into debt, he was also quietly accumulating a significant
financial burden himself.
In 2005, Levy acquired both the 304-unit rental building at 225
Rector Place and a rental building at 101 West 87th Street called
Columbus Green from the Related Companies in a deal valued at $165
Levy initially said he planned to market the two buildings as
rentals, but he incurred the wrath of tenants and several prominent
politicians when he attempted to evict most of the moderate-income
tenants living at 225 Rector Place under the city’s 80/20 affordable
“He seemed very sloppy in his business practices,” said Kim
Allen, president of the tenants association at 225 Rector Place. “I
think he believed when he bought the building that he would not have to
honor the leases.”
In fact, he did. In 2007, after the intervention of Attorney
General Andrew Cuomo, a settlement was reached that would guarantee the
leases of the 48 remaining affordable housing tenants through 2019.
Signs of stress
Prior to that ruling, though, Levy moved forward with his
conversion plans for 225 Rector and hired broker Michael Shvo as his
exclusive sales and marketing agent. Shvo hatched the idea to rename
the building from “Parc Place” to “Rector Square” and targeted young
couples looking for the quiet of Battery Park.
“From our side, at that point the relationship was a good relationship,” Shvo told The Real Deal. “He did give us a free hand to allow us to do what we needed to do with the building.”
The conversion appeared to be going so smoothly that the
tenants association disbanded, Allen recalled in a February interview.
“I thought everything was normal.”
However, the first outward signs of stress started last
summer. According to court records, in July, Levy began missing his
monthly $150,000 PILOT payments to the Battery Park City Authority,
which owns a ground lease under Rector Square.
Court documents show that at the same time, Levy was also
beginning to miss payments to several contractors. In September, he
worked out a payment plan with AgencySacks, his advertising agency at
Rector Square, after he fell behind by $308,000.
Meanwhile, at the former Columbus Green, now rechristened Park
Columbus, Levy is facing a similar round of construction delays, missed
payments and angry tenants. The owner of an antiques store in the
building’s retail space said he just got out of the hospital after two
years of exposure to dust and flooding from the Park Columbus
“He’s a derogatory man,” said Robert Levin, owner of Welcome
Home Modern Plus Gallery, who claims Levy once cursed him out while
trying to intimidate him into leaving.
“He told me, ‘Why don’t I get the fuck out of his store,'” Levin recalls.
Several contractors say they have not heard from Levy since
October, and cabinetmaker Poggenpohl alleges in a lawsuit filed with
the New York Supreme Court that it has not been paid in over a year,
with a total due of $261,000.
Lawyers for Levy, meanwhile, have fought to defend his
position at Rector Square. Despite foreclosure proceedings, he remains
in control of the unsold inventory in the building.
What could further harm Levy is that Miller, the
court-appointed receiver, plans to fight hard to make him responsible
for any common charges or other payments due from the unsold units.
Also, there is evidence that Levy failed to segregate the common
charges and PILOT payments from the general operating expenses at the
The Rector Square foreclosure is being closely watched as a
sign of what may come with condos around the city, where loan payments
are coming due, sales have stalled and buyers cannot get financing on
A broker that has previously worked with Levy fears that some
of his more ambitious projects may unfortunately define his legacy.
“It was a boom, boom time,” said the broker, who asked not to
be identified. “If you had a decent track record and a clever plan [you
“Looking back, some of those deals look foolish.”