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.