Fortress buys Sheffield57 at auction for $20M
August 06, 2009 01:30PM
By David Jones
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.
After buying the defaulted mortgage loan and senior mezzanine loan, Fortress advanced several million dollars to help pay off common charges and unpaid mechanic's liens that Swig had accumulated.
Swig overcame a ferocious legal challenge from Yair Levy and Serge Hoyda, the majority investors at Sheffield57, who alleged that Swig misappropriated more than $50 million in construction funds.
The two partners and Gramercy Warehouse Funding, a junior mezzanine lender on the project, last month filed separate suits to prevent today's auction. Motions to block the auction were denied by a State Supreme Court judge. The lawsuits alleged the auction was rigged to prevent other investors from acquiring the property. They also claimed that Swig arranged a back-end deal that would reward him for not pushing the project into bankruptcy.
"I did expect Fortress to prevail because the terms of the auction were such that it was very difficult for others to bid," said Stephen Meister, attorney for Levy and Hoyda.
Officials from Fortress were not immediately available for comment, but attorneys for both entities have previously dismissed the Levy and Hoyda allegations as wild conspiracy theories from partners who don't have any money to rescue the deal.
Swig attorney Y. David Scharf, said he hopes the deal will end the dispute with Levy and Hoyda.
"Pursuant to the cooperation agreement, the sponsor, which is comprised of Swig, Levy and Hoyda, has a profits participation if Fortress turns this project around and reaches certain financial milestones," Scharf said. "Our client is pleased to have negotiated this arrangement with Fortress on behalf of the sponsor entity and hopes that now that the foreclosure process has been completed there can be a cessation of hostilities between the partners ."
Scharf added that if the litigation continues, Swig will "move quickly to dismiss the complaint" and is confident he will be vindicated.
The foreclosure sale effectively wipes out Levy and Hoyda's interest in Sheffield57, a former 845-unit rental building that they bought with Swig for $418 million in 2005, one of the biggest acquisitions of a residential tower in U.S. history. Swig will no longer hold an equity stake in the deal. However, his true interest is a matter of dispute.
But, Fortress, in court papers filed in the Levy and Hoyda suit, disclosed that the three Sheffield57 investment partners will be eligible for about $7 million of backend revenue. The partners will be eligible for up to 49 percent of future revenues, based on a complicated formula.
Meanwhile, Rob Braverman, attorney for hundreds of condominium owners at the building, is scheduled to meet with Fortress this afternoon, to move quickly on a plan to relaunch construction and resume sales at the building. Attorney General Andrew Cuomo halted all sales at Sheffield57 because Swig failed to provide an updated amendment to the condominium offering plan, as well as audited financial statements.
"We're looking forward to working with the new sponsor and getting the project back on track," said Braverman.
Braverman says he was told that Swig will have no direct role in the project any longer, and that Fortress is looking for a new management company. Rose Associates, the former owner of Sheffield57, has been retained by Fortress as a consultant.
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Comments
Anonymous
hey where are all the comments?
Comment #1 Posted By: Anonymous 08/06/09
Anonymous
This is a milestone defining NYC R.E. for the months to come. basically it shows you that you can do whatever you want as a developer and sponsor on a project, steal money, rob partners, put tenants in awful living condition and all that is completely fine... What is Cuomo Doing?
Comment #2 Posted By: Anonymous 08/06/09
Anonymous
i still say bernie cell is waiting with an occupancy for mr.swig
Comment #3 Posted By: Anonymous 08/06/09
Anonymous
#2 You right, but for the wrong reasons. This deal is a milestone because it will lead to a massive decrease in residential real estate prices in NYC. Fortress has a low basis, sufficient capital, and a long enough time horizon, to make money selling units for $400 psf.
Comment #4 Posted By: Anonymous 08/07/09
Anonymous
no need for shills now. It is all over. No comment by swig equities in the WSJ, crains or barrons. why is that. not because he is proud of what happened yesterday. We will ensure that all vestiges of swig equities is striken from the Sheffield. Mrs Swig, you can pick up your picture at any time. It will be interesting to see what happens with the civil suit that Hoyda and Levy have brought. If they win will it become a criminal case.
Comment #5 Posted By: Anonymous 08/07/09
Anonymous
Big victory for Swig.
Comment #6 Posted By: Anonymous 08/07/09
Anonymous
There were dozens of really positive comments praising Kent for this historic maneuver. I wonder why they were all taken down.
Comment #7 Posted By: Anonymous 08/07/09
Anonymous
there is no criminal liability for being brilliant. way to go, Kent.
Comment #8 Posted By: Anonymous 08/07/09
Anonymous
ha ha ha.,.. I was hoping you fish came back. please define brilliant? 1. Defaulting on loans leaving your lenders dangling. I do not think that is good for future financings. 2. Losing to the tennants 3. screwing your partners 4. losing the Building and having no involvement except for maybe some back end payment 5. for failing to convert the building in a real estate boom 2005 - 2007 6.for surrounding yourselves with incompetents 7. for losing two other residential deals 8. for being sued by your partners 9. for hanging a piece of junk picture in the lobby 10. for not paying your vendors for two years 11. for becoming a joke in the industry. What is so brilliant about any of this. I think anyone else would do better. This was all Kents fault. He should have not been so greedy. Why do you think he did not respond to multiple articles. what can he possibly say. I planned this I'm brilliant. Maybe he is just to humble ...right
Comment #9 Posted By: Anonymous 08/07/09
Anonymous
doesn't anyone here understand real estate... the bid is 20MM in excess of the senior, which i believe is in the 400MM range. mezz and equity wiped out.
Comment #10 Posted By: Anonymous 08/07/09
Anonymous
"Scharf added that if the litigation continues, Swig will “move quickly to dismiss the complaint” and is confident he will be vindicated." GOOD LUCK WITH THAT KENT....Brilliant!!
Comment #11 Posted By: Anonymous 08/07/09
Anonymous
Kent Brilliant move losing the Square mile case for $28 million. Well done! Can't wait to see your next move.... I am sure it will be brilliant. maybe it will be back to San Fran.
Comment #12 Posted By: Anonymous 08/07/09
Anonymous
Kent if you didn't have yes men/women around you who called you "brilliant" for sub par performance than maybe you would not be in this mess.
Comment #13 Posted By: Anonymous 08/07/09
Anonymous
Rebny deal of the year for Swig. The entire industry watched this happen with awe. There are hundreds of other developer who wish they could pull this off.
Comment #14 Posted By: Anonymous 08/07/09
Anonymous
Kent has been proved right every step of the way. Defeat tenants in bogus legal action? Check. Defeat partners in bogus legal action? Check. Form partnership with largest hedge fund in the world? Check. Create windfall opportunity for himself (and partners) against all odds? Check. This is one for the ages. Impressive work by this guy and impressive work by Fortress as well to see an opportunity and take advantage of it.
Comment #15 Posted By: Anonymous 08/07/09
Anonymous
comment # 17 pull what off???? what did he do that was so brilliant.. please enlighten me. try to do it with facts dont say he pulled off a great move by getting fortress. It appears that Fortress does not want anything to do with him. Read the articles. Rose is taking over not swig equities. it probably means Fortress does not have too much confidence in Mr. Swig.
Comment #16 Posted By: Anonymous 08/07/09
Anonymous
Holdovers forgot the golden rule: Greed gets you nowhere, Pigs get slaughtered...
Comment #17 Posted By: Anonymous 08/07/09
Anonymous
number 16... you are funny. he did not defat the tenants in fact he went to the AG's office and gave them the opportunity to stay. His partners are still using him from what I understand. i don't think losing 28 million in the suare mile case is a windfall. He could have made millions on this deal but managed to lose much more for his lenders. ( what about them... they had faith in your boy) and his partners. Why do you think they are suing him for 50 million?/
Comment #18 Posted By: Anonymous 08/07/09
Anonymous
The last poster is clearly not a real estate professional - real estate is a blood sport. Lenders have no fiduciary responsibility to their borrowers and vice-versa. A lender would crush a borrower if given the opportunity - ask any developer. Swig outsmarted everyone and picked the right horse in Fortress. This is probably one of the most complicated and wildly successful transactions in NYC history and it is obvious that the naysayers either have no idea what they are talking about or have an agenda.
Comment #19 Posted By: Anonymous 08/07/09
Anonymous
Swig gets 49% of the deal? That's more than he had in the first place.
Comment #20 Posted By: Anonymous 08/07/09
Anonymous
I guess every article printed in the last two days must be by non-professionals because not one says the Swig outsmarted anyone. by the way Swig gets nothing... not even 49 cents unless Fortress makes a boat load of money.
Comment #21 Posted By: Anonymous 08/07/09
Anonymous
Shills will have nothing to say after today. Let it be known that everyone in the building is glad to see Swig and the K boys leave. Owners,renters and staff alike. Why do think that is? Is that a way to build his brilliant reputation? Goodbye Mr. Kent.... dont let the door hit you on the way out. We already told the doormen you are no longer welcome in the building
Comment #22 Posted By: Anonymous 08/07/09
Anonymous
I think this ranks as third best deal in real estate this year, behind Worldwide Plaza and AIG. The fact that Swig partnered with Fortress to gain even more than he would have had before in this market is impressive.
Comment #23 Posted By: Anonymous 08/07/09
Anonymous
I heard that Fortress and Swig are doing another deal together, it looks like they were each impressed with the other.
Comment #24 Posted By: Anonymous 08/07/09
Anonymous
oooh. tenant shills are so angry, they tried to fight the big boys and he outsmarted everyone. victory for swig must be so sweet.
Comment #25 Posted By: Anonymous 08/07/09
Anonymous
Holdovers found out that Karma will come back to bite you. Wonder what they will now have to say about Fortress/Swig partnership.
Comment #26 Posted By: Anonymous 08/07/09
Anonymous
give it up its embarassing... Like and old women trying to pretend she is still young. There is no one other than you who believes there is a partnership or that this was a great realestate deal orcherstrated by Swig. I can't even post anymore it hurts too much
Comment #27 Posted By: Anonymous 08/07/09
Anonymous
Swig'sonly mistake was originally partnering with the YL animal.
Comment #28 Posted By: Anonymous 08/07/09
Anonymous
Why is the Sales office open with the same swig employees if Rose is taking over?
Comment #29 Posted By: Anonymous 08/07/09
Anonymous
27, 22 - are the rest of you bitter renters - enough already. crawl back in your rent stablized hole - you will need it because you never bought anything in your life (took any risk) and won't have any equity in anything to even buy a condo in Florida. So, we will only know when you are dead by the stink coming out of your decaying Sheffield rent stabilized hovel.
Comment #30 Posted By: Anonymous 08/07/09
Anonymous
No one believes there is a partnership... except for David Jones... and the Judge presiding over the Fortress/Swig joint-defense... and the public partnership agreement... and the entire real estate industry... and everyone except the holdover tenant who can't accept that Swig won and the holdovers still have no buyout after spending all that money on wasted legal fees.
Comment #31 Posted By: Anonymous 08/07/09
Anonymous
I heard the holdovers are now trying to sue their own attorney for promising so much and delivering so little. you'd be upset too if you spent tens of thousands of dollars with the promise of a goldmine at the end of the rainbow. so sad.
Comment #32 Posted By: Anonymous 08/07/09
Anonymous
Hey Bitter Renters of the Rent Stablized and Holdover Variety: You are the BIG LOSERS in all of this. You have done nothing with your lives except leach off of others in the desperate hope to "hit the lottery" - Enough of your pathetic defaming of those involved. At least they tried, spent a ton of money, made a business decision and invested their own money and others. What have you done with your lives? Nothing. I am so sick of the self entitlement of renters in this city. As if there presence adds value to New York. Pay market rent or buy or expect nothing. Your mommy is not the City of New York.
Comment #33 Posted By: Anonymous 08/07/09
Anonymous
we still have our apartments...don 't be so sure as to what will happen next, concerning these units. Time is on our side. I think you are pathetic, we do not need to defame those involved.. they did a pretty good job of it themselves. Just a happy rent stabie..rid of Swig and the k-baum bros...and the entire circus act
Comment #34 Posted By: Anonymous 08/07/09
Anonymous
So much misinformation in these comments! Swig did not pull anything off - he simply defaulted on a lot of debt, including personal loans, and now the property is owned by Fortress. Yes, he has a chance to get paid some fees in the future if they do very well. But this is essentially a total loss for him, his partners, and unfortunately most of his lenders.
Comment #35 Posted By: Anonymous 08/07/09
Anonymous
Number 37 you are so wrong. kent is brilliant, brilliant, brilliant i tell you. His next move is to take the profits from the Sheffield and buy a newsstand on 57th street. This way he can watch the Sheffield as the happy people come and go. But that is not all, he will turn the newsstand into swig equities global headquarters.
Comment #36 Posted By: Anonymous 08/07/09
Anonymous
The holdovers can't even afford to pay their own attorney. "don't be so sure as to what will happen next?" - uh, I think you are packing to move out.
Comment #37 Posted By: Anonymous 08/07/09
Anonymous
The only misinformation is #37's refusal to believe or accept the truth - Swig pulled off a brilliant - unprecented - calculated - extremely difficult and strategic maneuver to save his project and keep it going. He now owns more than he owned before - all the naysayers have been silenced.
Comment #38 Posted By: Anonymous 08/07/09
Anonymous
I am at a loss when silly commenters speak of a borrower somehow failing his lenders when a loan goes into default. a borrower has no fiduciary duty to a lender - a lender is making an INVESTMENT. If you buy a stock and the stock goes down, the Company doesn't owe you an apology, they didn't "screw" you - you take a chance, you hope you make $$$. Swig did what was best for himself and his investors - this is a really enviable transaction for all developers on the outside looking in.
Comment #39 Posted By: Anonymous 08/07/09
Anonymous
The last poster is an idiot. Of COURSE all of the mezz lenders invested in the securitization - Swig probably didn't even know who had bought the loan until after it closed. And Swig pulled off a miracle - he is in a better position now than before. Lost all his money? Hardly. This is the REBNY deal of the year (or at least a top contender).
Comment #40 Posted By: Anonymous 08/10/09
Anonymous
Number 40 you probably think the sky is green if Mr. Swig said it was. If he did not lose his money that is a good thing. Because the owners are planning to sue him. The AG's office is after him, he just lost 28 million to square mile, (also thought of as investors ....Huh), and he is being is sued by his partners. I hope he has money lesft for us or we go to the DA
Comment #41 Posted By: Anonymous 08/11/09
Anonymous
Silly gooses, the liens have been paid, construction is starting up again... there is no legal basis for a lawsuit (well, you can always sue, but you'll lose and pay Swig's legal fees). The DA will tell you to go chase another rainbow.
Comment #42 Posted By: Anonymous 08/11/09
Anonymous
Good for Kent to come out on top, he deserves it. I don't know much about this project but I do know that Kent has donated millions upon millions of dollars to wonderful charities in NYC and abroad. A fine gentlemen.
Comment #43 Posted By: Anonymous 08/11/09
Anonymous
Again let it be known MR KENT IS NOT ON TOP OF ANYTHING. The law suits are not over. I predict he goes into personal bankruptcy. Don't forget he just lost 28 million suit to square mile.
Comment #44 Posted By: Anonymous 08/12/09
Anonymous
Swig just pulled off the deal of the year - give the guy a little credit. He outmaneuvered and outsmarted everyone else to end up on top. Great move.
Comment #45 Posted By: Anonymous 08/12/09
Anonymous
Number 45... I have a great deal for you. it is the Brooklyn bridge. If you are not interested I understand that Mr. "Brilliant" will sink some money into it.
Comment #46 Posted By: Anonymous 08/12/09
Anonymous
wow, so the last poster wants to sell a bridge in the face of the biggest real estate success story since Lehman's collapse. Go figure. This transaction will eventually be known as the biggest success this decade - watch and learn, people, watch and learn.
Comment #47 Posted By: Anonymous 08/12/09
Anonymous
Acquiring a distressed propety quickly by foreclosing on the senior mezz loan is a known ableit risky strategy. What's novel about this instance is that Mr. S appears to be on both sides of the equation. An innovation in "cramming down" a loan?
Comment #48 Posted By: Anonymous 08/13/09
Anonymous
if he is on both sides of the equation then it will give Mr. Hoyda nd Levy a much better case that Mr. Swig orchestrated the deal to lock out his partners. If you know something to that effect I am sure Mr. Levy and Hoyda will find you and have you testify. It is easy to track you down if you are posting form your own computers good luck
Comment #49 Posted By: Anonymous 08/13/09
Anonymous
This is a good one: Swig now defaulted on a loan to CITI for $5 million (or was that an investment) Swig owes Signiture bank 10 million and counting Swig owes square mile 28 million Swig owes owners 6 million This guy is "brilliant"
Comment #50 Posted By: Anonymous 08/13/09
Anonymous
What if Swig saved not only himself but his partners as well? Then he would not only be a brilliant tactician, but a menche as well.
Comment #51 Posted By: Anonymous 08/13/09
Anonymous
I am an owner and all I know is the liens are off the building and construction has restarted. That counts for a lot and Swig is okay in my book.
Comment #52 Posted By: Anonymous 08/13/09
Anonymous
if you are an owner then you know the restart has nothing to do with swig. he is a loser he lost the building and lost the trust of the owners he did NOTHING to get the liens off in fact there were liens on apartments in which he failed to tell the owners. why? because he is a LOSER
Comment #53 Posted By: Anonymous 08/13/09
Anonymous
Swig brought Fortress in, Swig got Fortress to invest their dollars to clear the liens and kick start the construction, Swig is the reason the building is going to be a success (as opposed to bankruptcy). You might not like the man or the fact that he owns more of the project than ever before, but give credit where credit is due.
Comment #54 Posted By: Anonymous 08/13/09
Anonymous
Let's see.... Swig wins, Fortress wins, the unit owners win, the contractors win, the building staff win, the mezz lenders lose. Seems all in all like a good deal for most, if not all.
Comment #55 Posted By: Anonymous 08/13/09
Anonumouse
This would be so much more interesting to read if people were required to identify themselves. But until then...Anonumouse
Comment #56 Posted By: Anonumouse 08/14/09
Anonymous
I see that they took off the bogus pictures from the Scaffolding and changed web site. That is not a good way to treat your partner. I guess Fortress was not that impressed with Swig after all.
Comment #57 Posted By: Anonymous 08/27/09
Anonymous
And after three years the ventilation in the common corridors came back on and the water is actually hot again.
Comment #58 Posted By: Anonymous 08/28/09
Anonymous
It's great to be Swig-less.
Comment #59 Posted By: Anonymous 08/28/09
Anonymous
Swig still intricately involved in each and every aspect of Sheff57.
Comment #60 Posted By: Anonymous 09/01/09
Anonymous
Na..ah.... He is no where to be seen! Wrong again number 60.
Comment #61 Posted By: Anonymous 09/10/09
Anonymous
Let's say this again - Swig still intricately involved in each and every aspect of Sheff57.
Comment #62 Posted By: Anonymous 09/14/09
Anonymous
lets say this again Na ah.... He and is cronies are gone. gone gone.......And we love it. Finally the Sheffield will rise from the ashes.
Comment #63 Posted By: Anonymous 09/14/09
Anonymous
swig and staff are still in building more than ever before. he is still running the show, running construction and sales.
Comment #64 Posted By: Anonymous 09/17/09
Anonymous
Meister is a real creepy guy. Stay away from him. He'll cheat you for sure.
Comment #65 Posted By: Anonymous 12/12/09
Anonymous
#65 is Danny (for sure)
Comment #66 Posted By: Anonymous 12/28/09