Anglo Irish files to foreclose on Rector Sq.
February 13, 2009 05:45PM By David Jones
Rector Square
Weeks after shutting down the sales office and halting construction at Rector Square, developer Yair Levy has been sued by Anglo Irish Bank, which is looking to foreclose on $165 million in mortgage loans made to the troubled Battery Park condominium.
Anglo Irish Bank claims that Levy failed to cure multiple loan defaults, racked up more than $285,000 in mechanic's liens, defaulted on more than $351,000 in taxes for a Battery Park ground lease, missed deadlines for renovation work and defaulted on other projects around the city.
"In doing so, defendants YL LLC and Levy have placed plaintiff in the untenable position of being unable to protect its collateral or to complete the project without the intervention of the court," Anglo Irish Bank said in the complaint.
Levy originally bought the building at 225 Rector Place at South End Avenue in 2005 from the Related Companies in a $165 million deal that included Columbus Green, which was converted to Park Columbus at 101 West 87th Street. Levy stopped construction at that property earlier this month.
Levy originally financed the deal through a $943 million commercial mortgage-backed security led by Lehman Brothers, which included several other high profile condo loans, including a loan for 25 Broad Street.
In September 2007, Levy entered a deal to refinance the loan with Anglo Irish Bank, Fortress Investment Group and Drawbridge Special Opportunities Fund, who are also listed as plaintiffs in the case.
Anglo Irish Bank, in the complaint filed Monday in New York State Supreme Court, alleges that Levy agreed to sign a series of guarantees to secure the $165 million loan.
The lenders allege that Levy failed to pay $631,158 to Battery Park City Authority and missed all but one monthly payment of $150,000 since July 2008.
According to the lawsuit, Levy owes $117.3 million, plus $662,894 in accrued interest. The lenders are asking that the court appoint a receiver to manage the property.
The building has been embroiled in controversy ever since Levy acquired the property in 2005. Attorney General Andrew Cuomo intervened in 2007 after Levy tried to evict 78 tenants who were living there under the city's 80/20 affordable housing program.
The suit indicates that 72 of the building's 304 units have been sold, however superbroker Michael Shvo has struggled to sell many units as lenders tightened lending requirements on many new conversion properties, leading Levy to shut down the sales office in January.
Streeteasy.com shows that 15 apartments are listed for sale from $610,000 for a 579-square-foot studio to $1.4 million for a 968-square-foot two-bedroom unit.
Real estate attorney Sal Strazzullo, said he believes the bank should be more willing to broker an arrangement to keep the building operating rather than foreclose.
"What the bank should do is sit down with the developers and try, by any means necessary, get it completed and sold with everyone across the board taking some sort of hit," said Strazzullo. "People don't realize that prices need to be adjusted."
Jim Cavanaugh, president of the Battery Park City Authority, said the foreclosure does not reflect the future of other properties in the area.
"From our perspective this is a building that perhaps lacked the necessary resources and occurred at a very difficult time," he said.
Dan Fasulo, managing director of research at Real Capital Analytics, said the suit is a sign of widespread concern in the residential condo market.
"I think everything's falling apart to the point where everyone realized we're not going to sell," Fasulo said. "That's why the bank gets nervous. That's why the bank starts to act on technicalities that in a good market they wouldn't' worry about."
In January, Anglo Irish Bank settled a contentious legal dispute with developers Lev Leviev and Maurice Mann, averting a foreclosure suit at the Apthorp, a major conversion property at 380 West End Avenue.
Levy was not immediately available for a comment and Anglo Irish Bank declined to comment.
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Comments
Anonymous
The reason that this is in foreclosure is because Yair Levy is a terrible developer, and an even worse person. Who would want to sit across the table from this guy and try to negotiate anything? I would check departing flights from JFK to countries with no extradition to the United States - that's where he is headed.
Comment #1 Posted By: Anonymous 02/13/09
Anonymous
Sheebus? What moron is paying 1500psf in Battery Park City? And that's on top of the crazy ground lease! Everyone involved in this fiasco- including Yair Levy and all of those idiotic buyers - deserve what's coming to them.
Comment #2 Posted By: Anonymous 02/13/09
Madogg
The credit crisis was caused by the same greedy bunch of SOBs that caused the demise of Wall St., the commercial property free fall and the end of NYC as the financial epicenter of the world. SHAME! (but these guys have none)
Comment #3 Posted By: Madogg 02/13/09
Anonymous
Hey 2, what's the crazy groundlease situation?
Comment #4 Posted By: Anonymous 02/14/09
Anonymous
Batter Park's land is a ground lease with the City. Therefore condo purchasers will never "own" their unit outright.
Comment #5 Posted By: Anonymous 02/14/09
Anonymous
The land was lease for 99 years roughly 30 somewhat years ago. Technically it can be taken back by the city when the lease ends. Slim chance of that happening but it is a possibility. This is the reason there are no abatements in that area
Comment #6 Posted By: Anonymous 02/14/09
Anonymous
It is ZERO, NIL, IMPOSSIBLE that they State will take the apartments back at the end of the land lease. That is just stupidity! Land leases are simply renegotiated. It is in NO ONE's interest to take the apartments back. BPC is a cash cow for the city/state that allows afforable housing to be built elsewhere in the city and they want to keep it that way. It is also why apartment prices tend to have a significant discount relative to other areas in Manhattan. You pay less up front because you do not own the land. That said, $1500 psf in BPC is ridiculous; especially for a conversion property and not a new one like the Visionaire or One Rockefller. No wonder they sold squat!
Comment #7 Posted By: Anonymous 02/14/09
Anonymous
I think the court should first give the poor who purchased these units from YL either their money back, or a significant discount, before they start selling off these units to the public.
Comment #8 Posted By: Anonymous 02/14/09
Anonymous
Fool #8 the people who closed on their units, will not lose their units. The units that did not sell, will now be owned by the bank, not the developer. That's it. Levy did a terrible job, has no construction experience and is seemingly a crook. The bank will take the property and either rent or sell the units, finish the job and get most if not all of its money. This is called capitalism. The bank made a bad loan, and will suffer the consequences, unless some idiot bureaucrat tries to Fix the situation.
Comment #9 Posted By: Anonymous 02/14/09
Anonymous
How about Park Columbus? The construction company took off in December because YL could not pay the bills. YL lost the financing for Park Columbus months ago, and is desperately seeking for a lender. I wish them luck! I heard that Halstead still shows the building by appointment, and I wonder why. One has to be extremelly stupid to buy there. How are the people under contract at Park Columbus and Rector Sq. reacting to this mess?
Comment #10 Posted By: Anonymous 02/14/09
Anonymous
#2 the Ritz Carlton, The amex exchange and Goldman Sachs have also built on the land lease. These are pretty smart companies and am sure that they thought it through like all the other developers. That being said, your comment was not very well thought out. I guess thats why our opinions are on a blog and not published in the NYT.
Comment #11 Posted By: Anonymous 02/14/09
Anonymous
Why is Halstead involved with this developer? Is Halstead the new Shvo?
Comment #12 Posted By: Anonymous 02/14/09
Anonymous
Why is anyone involved with this developer? Yair Levy is a crook, a thug, a moron (supposedly) and is dead broke. And he is a mean dude - the most hated guy in real estate - by a country mile.
Comment #13 Posted By: Anonymous 02/14/09
Anonymous
Lets not forget he gets in head locks, and throws buckets at people. Looks like he is going to loose it all.
Comment #14 Posted By: Anonymous 02/14/09
Anonymous
#2- I don't know anyone who bought at 1,500/sq ft. That may be what the more expensive units are but that's not what most units are. Also, several of the units in the building have REALLY great views of the harbor (which you'd have to pay a lot more for in the Visionaire or RiverHouse) and, while a conversion, the model units looked good. I don't think the people who bought are morons. The only moron is Yair Levy since he can't seem to develop anything worth his life. On top of that, he's a liar and a cheat and all that has finally caught up to him. In the end, the bank will take over his interest in this property, develop it the way it should be developed, rent out/sell the unsold units, and life will go on. Levy, on the other hand, will hopefully be thrown in jail for tax evasion. By the way, both his name and that of SHVO are as good as mud after this and the various other fiascos these two have been involved in.
Comment #15 Posted By: Anonymous 02/14/09
Anonymous
#11 - Park Columbus is likely next. He has a different lender on that property but that lender is probably paying close attention to what is happening at Rector Square. The stories are almsot exactly the same - YL converting a rental to condos, YL taking forever to do the conversion, YL halting construction for no reason, and the sales agency getting stuck trying to persuade people to buy in an unfinished building - in this economy no less. The common denominator is YL and thier incompetence.
Comment #16 Posted By: Anonymous 02/14/09
Anonymous
Just because a person can put a group together that can get financing-Doesn't make them real estate developers. We need downturns to wash the garbage out of the market. $1500 for Battery Park City indeed. Everyone in this scenario does deserve what's coming.
Comment #17 Posted By: Anonymous 02/16/09
Anonymous
NO ONE paid $1500 pfs...more like $1,000
Comment #18 Posted By: Anonymous 02/17/09
Anonymous
Definitely not $1,500 PSF.
Comment #19 Posted By: Anonymous 02/17/09
Anonymous
How do the unit buyers get affected directly? Can someone weigh in here, please?
Comment #20 Posted By: Anonymous 02/18/09
Anonymous
Can the bank take the property of the units that have been sold?
Comment #21 Posted By: Anonymous 02/18/09