Swig rushes to sell debt at Sheffield57
June 10, 2009 06:00PM By David Jones
Swig trying to sell loan at Sheffield57
Under the proposed deal, Guggenheim Structured Real Estate would sell its debt in the building, which includes a senior mezzanine loan of $76 million, and a junior mortgage loan of about $2 million, sources said.
The sources added that Swig and Guggenheim were looking to sell the debt at 90 cents on the dollar, while most offers were coming in at 60 to 70 cents.
The buyers would then foreclose on the note, take over the property, and pour millions of dollars into the building to complete construction and cover delinquent payments owed to numerous contractors.
"The note's in default," said an executive familiar with the negotiations, "but Guggenheim doesn't have the [additional] money to put into the deal that the property needs."
Sources say that Fortress had been in discussions with Area Property Partners, formerly known as Apollo Real Estate Advisors, to become a member of the investment group. The sources added that Area officials, however, had concerns about the complicated legal and financial entanglements at Sheffield57. The building's former owner, Rose Associates, has emerged in recent days as a potential manager and investor in the deal.
"We do not comment on our investments or potential investments," said Lilly Donohue, a managing director at Fortress.
At least two other firms were left at the altar during the bidding process, including Angelo, Gordon & Co., and Westbrook Partners. Officials at both firms declined to comment. Officials from Area and Fortress also declined to comment.
Swig has been in negotiations to recapitalize the luxury tower for weeks amid intense scrutiny of state regulators and litigation from contractors and condo unit owners over the pace of construction and millions in unpaid bills.
As The Real Deal previously reported, Attorney General Andrew Cuomo ordered Swig to suspend sales at Sheffield57, located at 322 West 57th Street, after the sponsor failed to update his condo offering plan with the necessary financial disclosures.
In a May lawsuit, a group of owners at Sheffield57 alleged that Swig failed to pay $5.5 million in common charges, and also filed a complaint with Cuomo's office that Swig improperly withdrew funds from the building's reserve fund for legal fees and other expenses.
Yesterday, companies controlled by Swig's two major investment partners at Sheffield57, Yair Levy and Serge Hoyda, filed a derivative lawsuit in New York state Supreme Court against Swig and all of the major lenders on the project, including Guggenheim, Wells Fargo, the trustee of the Sheffield57 mortgage-backed loan and Keycorp Real Estate.
Among the allegations, Levy and Hoyda allege that Swig used $50 million in building loan proceeds for personal and other uses, paid his own construction firm for work that was never performed and signed off on major decisions without the knowledge or consent of Levy and Hoyda.
"Wells Fargo, Keycorp and Guggenheim knowingly allowed Swig to siphon off building funds for improper, non-project related purposes because they knew it would only accelerate the inevitable -- a borrower default -- and enable them to declare loan defaults and then sell their loans as "loan to own," the suit alleges.
Stephen Meister, attorney for Levy and Hoyda, is asking for more than $84 million in damages, a judgment of $50 million against Swig, an injunction against Swig to block his role as manager of Sheffield57 and the appointment of a receiver to oversee the building.
Swig did not respond to repeated requests for comment.
According to documents obtained by The Real Deal, Swig has $262 million in mezzanine debt as of April, including the $76.1 million Guggenheim loan; $65.9 million from JP Morgan Chase; $19 million from Petra Fund; $36 million from Gramercy Capital; $29.5 million from New York Life and $35 million from MMA Realty Capital.
Moody's Investors Service last month downgraded a collateralized debt obligation from Credit Suisse First Boston, citing the weak financial condition at Sheffield57. The report noted that the Sheffield57 mortgage, which has a remaining balance of $30 million, was transferred into special servicing, after Swig chose not to cover a $52 million construction shortfall.
The report noted that Swig owed $14.2 million in unpaid construction costs, and that he accumulated $6 million in mechanic's liens that basically blocked the ability of individual condo owners to purchase title insurance.
The report also noted that the building's reserve fund had a balance of only $154, but Swig posted a $9 million letter of credit that expires July 9, 2009. Moody's said that Swig failed to make a May interest payment, but noted that there were enough funds from the building's rental income to pay interest on the senior loan.
Robert Braverman, attorney for the Sheffield57 owners' group, alleged that Swig told his clients in an April meeting that it would cost about $35 million to complete construction of the building. However, sources familiar with the negotiations agree with the Moody's estimate that the building would require more than $50 million in additional funding.
Sources familiar with the owners say there are other investors that are willing to buy the debt and assume control over the building, but they have significant reservations about any deal that leaves Swig involved.
Sheffield57 unit owners are scheduled to have another meeting at the AG's office late next week.
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Comments
Anonymous
Everyone wants Swig out..but he cannot go, because he has a 20 million dollar construction bond, which says that he will finish the construction on the building. So it is either all or nothing for him, as he could throw the building into chapter 7, and bring everyone else down with him, if they will not agree to let him stay. There are no secrets....this deal is not done yet.
Comment #1 Posted By: Anonymous 06/10/09
Anonymous
ready to shut down the comments on this site yet?
Comment #2 Posted By: Anonymous 06/10/09
Anonymous
BWAH!
Comment #3 Posted By: Anonymous 06/10/09
Anonymous
How stupid....how stupid.....how STUPID can these banks be. They lend these guys $500M with $25M in equity in the deal. Which knowing how these trio work is borrowed money to begin with. Then they let Swig rip off the project in the process. Everyone involved is obviously heavily paid under the table to allow this to happen. They should all end up in federal prison
Comment #4 Posted By: Anonymous 06/10/09
Anonymous
"Swig has been in negotiations to recapitalize the luxury tower for weeks amid intense scrutiny of state regulators and litigation from contractors and condo unit owners over the pace of construction and millions in unpaid bills."
Comment #5 Posted By: Anonymous 06/10/09
Anonymous
Right! Why hasn't he been arrested for charlatanism !!!
Comment #6 Posted By: Anonymous 06/10/09
Anonymous
What exactly is charlatanism !!! Haris???
Comment #7 Posted By: Anonymous 06/10/09
Anonymous
this is not the middle ages folks...he should be brought up on charges by the District Atty. All of this should be looked into...there is just too much going on concerning fraud in so many directions. All of these people cannot be wrong, the common ingredient is Swig.
Comment #8 Posted By: Anonymous 06/10/09
Anonymous
He will be brought up on charges. He's going to jail.
Comment #9 Posted By: Anonymous 06/10/09
Anonymous
What about fiduiary reposibility? So basicly he will screw for partners,like he did Ofer Yardeni,asher Zsmir,charles dayan,lehman brothers ..fill in the rest
Comment #10 Posted By: Anonymous 06/10/09
Anonymous
Help, Barbara Corcoran ! ! ! What should Kent Swig do???
Comment #11 Posted By: Anonymous 06/11/09
Anonymous
Can someone please explain Kent Swig's relationship to the real estate firm Brown Harris Stevens and Halstead for clarification. Thanks.
Comment #12 Posted By: Anonymous 06/11/09
Anonymous
they are Swig companies that will eventually be owned by the Sheffield 57
Comment #13 Posted By: Anonymous 06/11/09
Anonymous
#15: Swig is one of FOUR partners that owns BHS & Halstead.
Comment #14 Posted By: Anonymous 06/11/09
Anonymous
if Swig goes there is alot of hope for Sheffield57. anyone doing a deal should make sure there is an arraingment for Swig to get out of his completion bond. otherwise it will be just another group of investors to get shafted by Swig.
Comment #15 Posted By: Anonymous 06/11/09
Anonymous
#13: Terra Holdings owns BHS & Halstead - Swig is one of 4 Terra Holdings principals.
Comment #16 Posted By: Anonymous 06/11/09
Anonymous
#16- stand corrected- 4 owners, swig one of them. one thing is a constant though- swig doesn't pay his bills or honor commitments.
Comment #17 Posted By: Anonymous 06/11/09
Anonymous
Guggenheim should let Swig do the chap 11 that he is threatening. Swig will be gone after some months after the Chap 11 is done, but Gug would get more for their note. with Swig in the deal its costing Gug tens of millions.
Comment #18 Posted By: Anonymous 06/11/09
Anonymous
I would think that throwing the entity into chapter 11 would trigger a full recourse event in his loan docs.....Swig is screwed. The best thing he can do for everybody is get out of the deal.
Comment #19 Posted By: Anonymous 06/11/09
Anonymous
what are the chances of the Levy/Hoyda lawsuit stoping this note sale ?
Comment #20 Posted By: Anonymous 06/11/09
Anonymous
i wonder if Swigs PR people are geting paid. I believe its Rubenstein. No pro Swig shills posted here yet.
Comment #21 Posted By: Anonymous 06/11/09
Anonymous
why would swig pay rubensteins bill when he doesn't pay his other bills? imagine investing with this guy? or working for him?
Comment #22 Posted By: Anonymous 06/11/09
Anonymous
from The New York Sun: Zeckendorfs Sue Swig Over Real Estate Deal By SARAH PORTLOCK, Special to the Sun | November 1, 2007 Two of the city's leading landowners are suing a fellow titan of the local real estate scene in a clash brought on by the recent acquisition of a competing residential management company, according to a legal filing in state Supreme Court. In what could be the first lawsuit against one of their partners in more than a decade, Arthur and William Lie Zeckendorf have filed a summons, which is among the first legal steps taken before filing a formal lawsuit, against Kent Swig, with whom they purchased Brown Harris Stevens, one of the city's largest real estate brokerage firms, in 1995. According to an attorney for the Zeckendorfs, Jamie Brickell, the dispute arose in early October when Mr. Swig bought a competing property brokerage firm, Helmsley-Spear, with his private real estate company, Swig Equities, and did not immediately inform the Zeckendorfs of the move.
Comment #23 Posted By: Anonymous 06/11/09
Anonymous
#24- Didn't know the Zeckendorfs sued swig as well. do you know the status of that law suit? tough to keep them all straight
Comment #24 Posted By: Anonymous 06/11/09
Anonymous
Wow. This Swig is just simply bottom of the barrel. No honor.
Comment #25 Posted By: Anonymous 06/11/09
Anonymous
Trust me - it is Yair Levy who is the real bottom feeder in this mess. Levy is the worst of the worst. As dumb as he is despised.
Comment #26 Posted By: Anonymous 06/11/09
Anonymous
"..there are other investors that are willing to buy the debt and assume control over the building, but they have significant reservations about any deal that leaves Swig involved." I would think so
Comment #27 Posted By: Anonymous 06/11/09
Anonymous
the Zeckendorf lawsuit was settled somehow . i dont know the details.
Comment #28 Posted By: Anonymous 06/11/09
Anonymous
looks like swig was going to shaft his partners in the deal by having the LP wiped out. but then he would still get management fees ect. These criminal charges should be investigated.
Comment #29 Posted By: Anonymous 06/11/09
Anonymous
looks like the sheffield and all the investors got totally swig'ed. anyone know the status of 25 and 45 broad?
Comment #30 Posted By: Anonymous 06/11/09
Anonymous
Adam Rose in the building twice this week...
Comment #31 Posted By: Anonymous 06/11/09
Anonymous
it seems like everything yair levy touches turns to crap... the guy shut down his own office and closed up shop. he is desparate, desparate, desparate.
Comment #32 Posted By: Anonymous 06/12/09
Anonymous
if this building goes into chapter 11 or chapter7, there will be a receiver appointed. Not just one, but two, the tenants still have the 7A, and we will have their own court appointed receiver. This has the potential to go on for years if it happens. The receivers will attempt to un-ravel the financials and create a money trail. Not good for Swig..maybe he better get out while he can, before a city appointed receiver moves in here, along with another receiver for the owners who will both come with microscopes, and report everything to the AG's office. This has the potential to get kicked up even higher, like Federal Court. And of course, all of the other lawsuits will be in the bankruptcy courts clammering for money. I guess this is a way of life for a person like Swig.
Comment #33 Posted By: Anonymous 06/12/09
Anonymous
"Swig has been in negotiations to recapitalize the luxury tower for weeks amid intense scrutiny of state regulators and litigation from contractors and condo unit owners over the pace of construction and millions in unpaid bills." pretty much says it all
Comment #34 Posted By: Anonymous 06/12/09
Anonymous
My guess is Swig will be filing bankruptcy by Monday, Swig flunkies who lie and trash others will be blogging from their homes.
Comment #35 Posted By: Anonymous 06/12/09
Anonymous
#36- swig will likely just BK his LLC or LP associated with the sheffield, and of course not pay outstanding debts to the bldg and partners. He will likely BK and not pay same at 25 Broad and 45 Broad. whata guy
Comment #36 Posted By: Anonymous 06/12/09
Anonymous
Swig paid shills are after Levy in this discussion. Makes sense. we know they dont like each other after both debacles at 92 and Amsterdam where they were partners and now the Sheffield57. But remember Sam Hoyda the third partner is after Swig also. hey Rubenstein are you getting paid ? btw if you were paid with absconded funds you have to give the money back. LOL
Comment #37 Posted By: Anonymous 06/12/09
Anonymous
Was Zeckendorff settled? I thought it looked open on the online court records.
Comment #38 Posted By: Anonymous 06/12/09
Anonymous
Let's just say this - there is a reason the entire real estate industry stands behind Kent and Yair has no friends, no supporters and no investors. We know the truth as to who treats their partners and lenders the right way.
Comment #39 Posted By: Anonymous 06/12/09
Anonymous
Indeed, #39 - everybody stands behind hero Kent. After All, only his lenders, buyers, tenants, contractors, sales agents, and partners are suing him.
Comment #40 Posted By: Anonymous 06/12/09
Anonymous
Yair has more lawsuits than Swigg... and more people who want to see him go down HARD. Lenders, buyers, tenants, contractors, sales agents, patners, receivers...
Comment #41 Posted By: Anonymous 06/12/09
Anonymous
Number 41 who are you? They both are poor business men. Lets agree on that.
Comment #42 Posted By: Anonymous 06/12/09
Anonymous
Kent has built Brown Harris and Halstead from nothing into billion dollar companies. you gotta give him credit for that. Yair made a modest living selling undershirts, ladies undergarments and socks.
Comment #43 Posted By: Anonymous 06/12/09
Anonymous
He should have stuck with that, instead of the greedy schemes that have caused all of the lawsuits, and caused so much TROUBLE to so many people.
Comment #44 Posted By: Anonymous 06/12/09
Anonymous
Signature Bank filed suit on Ken Swig for non payment of a 4.75 million dollar loan . New York Supreme Court May 2009 .
Comment #45 Posted By: Anonymous 06/12/09
Anonymous
In the next year or two, what is all of this likely to mean to those who have purchased untits? To those who rent from owners? To those who remain as pre-conversion tenants? To potential buyers?
Comment #46 Posted By: Anonymous 06/12/09
Anonymous
All of the monies that come in, from rental tenants and owner maintenance fees, will be collected by a court appointed receiver, who is usually an atty. The day to day expenses of the building will be paid for out of this fund. Lets hope that nothing really serious happens, concerning the roof, boilers etc..because Swig cleaned out the reserve fund. We could be subjected to an assestment to raise money for the reserve fund . No-one will be able to refinance their apt, or sell it or close on any others, because Swig ruined the title of the building, therefore no title insurance company will touch this place now. In other words we are all stuck...unless this building changes hands in a clean manner. However, it seems that Swig is blocking this because of his own interests. A chapter 7 or 11 will prolong everything, and could delay any real progress in here for years. There are so many lawsuits and problems, all of this would have to be sorted out in bankruptcy court, instead of a boardroom. I would say if this happens, we will be in limbo for quite some time, possibly years.
Comment #47 Posted By: Anonymous 06/13/09
Anonymous
the fact that 2 boilers are broken and we may need a new roof makes this really scary
Comment #48 Posted By: Anonymous 06/13/09
Anonymous
The State should audit the books for Swigs Sheffield57 condo.
Comment #49 Posted By: Anonymous 06/13/09
Anonymous
wont happen 49, Cuomo got campaign contribution money from Swig and other real estate interests . What the owners should do is a demostration outside Cuomo's office if they see they arent getting results . Fact is Cuomo office was asleep at the switch. Took them along time to stop sales after the condo plan was no longer efeective because of lack of amendments. 5 months late .
Comment #50 Posted By: Anonymous 06/13/09
Humpty Dumpty
Swig was able to build BHS and H because the market gods were with him.
Comment #51 Posted By: Humpty Dumpty 06/15/09
Anonymous
the AG"S office is useless..the tenants found this out a long time ago. I would say to try to get the District Atty. interested at this point. If you wait for the AG to do anything, you will wait a year, and then nothing will be done. This is a very serious mess, and you better have a war chest ready to get anyone to listen to your intrests in banckruptcy court...get in the very long line of creditors etc. meantime we will have to figure ourt a way to keep this building going.
Comment #52 Posted By: Anonymous 06/15/09
Anonymous
the remaining tenants reduce the value of the condos in the building. hopefully the govt someday will get rid of rent stabilization and get them out.
Comment #53 Posted By: Anonymous 06/17/09
Anonymous
swig quite simply doesn't pay his bills, and a court will decide if he also misappropriated funds, which send him to prison
Comment #54 Posted By: Anonymous 06/17/09
Anonymous
#53 dream a dream...Borough Pres. Stringer is going to put a rent freeze on increases for rent regulated tenants, the first one in 40 yrs. Rent regulated tenants in this building will either move away, or live the rest of their lives in the building..or perhaps purchase, if offered a proper insider price, which could happen also. The people who are reducing the value of the condo, are Swig and Co...when they leave, and the financiial problems are solved, then people will be interested in buying.
Comment #55 Posted By: Anonymous 06/18/09
Anonymous
the rent stabies will be gone, gone, gone because the republican state senate is going to overturn rent stablization laws and make these people pay real market rents.
Comment #56 Posted By: Anonymous 06/18/09
Anonymous
55, what do you think is a 'proper insider price'?
Comment #57 Posted By: Anonymous 06/18/09
Anonymous
Notice how there's always a post to demonize stabilzed renters. Did the stabies mislead buyers, divert building funds, fail to pay contractors and agents, default on loans?
Comment #58 Posted By: Anonymous 06/18/09
Anonymous
No, the Stabies think they are entitled to a free ride at the expense of EVERY other market rate paying tenant. It is socialism, at best, and stealing, at worst.
Comment #59 Posted By: Anonymous 06/19/09
Anonymous
what the people that Swig is trying to get for new financing dont realize is that most of the units waiting to close want to back out. its something in the tens of millions of dollars. bad deal.
Comment #60 Posted By: Anonymous 06/19/09
Anonymous
#59, RS is the law, written by people a lot smarter than you. Don't like it, you can move somewhere else and hate-blog from there.
Comment #61 Posted By: Anonymous 06/20/09
Anonymous
#61, you should make enough money to pay a fair market rent. you shouldn't be stealing your neighbors tax dollars. wait and see - it is in the pipeline for rent stabilization to go bye-bye - then market rents will fall and no one will get an underserved free ride.
Comment #62 Posted By: Anonymous 06/20/09
Anonymous
If RS vanished today market rents would not change, there are too few RS apts left. Landords have already managed to kill it with decontrol and new construction loopholes. The rest will go away by attrition with time. Then landlords will be free to gouge to their hearts' content and quality of life and services in the city will fall as rents go up.
Comment #63 Posted By: Anonymous 06/20/09
Anonymous
Swig tried his best to slum out the stabilized tenants. He did shake a few loose and as a result a few left. The ones that were left were able to expose all the bad construction, and the illegal activities with asbestos . Hint to bad developers : if you going to break the law make sure noone is around. Buy the tenants out or get them temporary quarters. Then you can cheat all you want noone will know what your doing.
Comment #64 Posted By: Anonymous 06/20/09
Anonymous
Most rent stablized tenants will lie, cheat and steal to keep their windfall lease. It is so pathetic how many of them make more than the $175,000 threshold and simply manipulate their income to avoid paying a legal rent like everyone else. They should go to jail - it is equivalent to tax evasion except these self-entitled fools think that NYC owes them something. So sad, so pathetic.
Comment #65 Posted By: Anonymous 06/20/09
Anonymous
Comment #66 Posted By: Anonymous 06/21/09
Anonymous
So pathetic that #65 hijacks every thread about his boss' nefarious activities to rail about rent stabilization as if THAT were the problem here.
Comment #67 Posted By: Anonymous 06/21/09
Anonymous
Rent stabies need to fight for their own leases - and they should - otherwise more middle class will be forced to move to outer bouroughs. Whether it is "fair" or not, it is the LAW and we would be dumb dumb dumb to give up our leases and our free ride. Most market rate tenants would lie, cheat steal to be in our position.
Comment #68 Posted By: Anonymous 06/21/09
Anonymous
Does anyone know if this building got a re-fi or not?? There seems to be some talk that some contractors may have gotten paid, like the elevator people.
Comment #69 Posted By: Anonymous 06/25/09
Anonymous
looks like a foreclosure now
Comment #70 Posted By: Anonymous 06/28/09
Anonymous
Rent stabies are also nbhd.stabies and one of the things that keep NY great. i wish owners would not complain, you bought the building on that basis. That said, vacceny decontrol would be a great idea.
Comment #71 Posted By: Anonymous 06/30/09
Anonymous
Ill take over that building ad get it in shape, sell it out and make everyone happy...no problem...Can you guess who i am?
Comment #72 Posted By: Anonymous 07/02/09
Anonymous
Yair should have hit Swig with a hammer, not an ice bucket
Comment #73 Posted By: Anonymous 07/08/09
Anonymous
I would have preferred and ice pick..to the ice bucket. What will it take to get rid of this guy, he has a strangle-hold on this building.
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