Rector Square buyers allege condo used for dorms, hotel stays

New York /
Feb.February 20, 2009 12:10 PM
 Units at Rector Square allegedly available per night and for students

Nearly a year after gaining regulatory approval, Rector Square developer Yair Levy failed to disclose the building’s financial records to buyers at the troubled condominium, offered vacant apartments for extended-stay hotel guests and sold at least 10 apartments for use as college dorm rooms, according to attorneys and complaints filed with state Attorney General Andrew Cuomo.

Anglo Irish Bank filed suit in New York State Supreme Court earlier this month to foreclose on the 304-unit building after Levy defaulted on a $165 million loan to the lender, on payments to the Battery Park City Authority and failed to meet construction deadlines.

Marc Held, a Brooklyn attorney representing about 50 Rector Square buyers, said his clients were kept in the dark for weeks about the building’s deteriorating condition, even though construction stopped and the sales office was shut down in mid-December.

“The unit owners were not provided [with] any information about what was going on either by the sponsor, the management company or the Battery Park City Authority,” Held said.

As The Real Deal first reported, Anglo Irish Bank alleges that Levy owes more than $117 million in principal, plus interest, on the mortgage.

According to the complaints filed with Cuomo’s office, at least five unsold apartments were used as extended-stay hotel rooms by Marriott ExecuStay, a Marriott International unit that offers hotel rooms of up to 30 days in business cities around the world.

Using the condo for extended stay hotel nights may be in violation of local zoning laws, however such a deal appears to clearly violate Levy’s condominium plan, which bans owners from renting out their own apartments.

Jason Post, a spokesman for the mayor’s Office of Special Enforcement, which handles illegal hotel usage, said if the building had 421a or J51 tax abatements, then offering hotel space would be a clear violation of zoning laws. He referred the matter to the Department of Housing Preservation and Development.

A Marriott spokesman said the company was looking into the matter, however the Marriot Web site clearly lists Rector Square as one of its ExecuStay hotel sites.

Buyers also allege that Levy sold several apartments to the University of Rome, which uses the apartments as dormitory rooms for students. New York City Department of Finance records obtained by The Real Deal show that at least 10 apartments were sold to La Sapienza University di Roma in October 2008 for $3.1 to $3.3 million.

The complaints also allege that Levy told the buyers that 40 percent of the units were pre-sold, however the lawsuit by Anglo Irish shows that only 72 of the buildings 304 units have been sold.

Cuomo, whose office previously intervened when Levy tried to evict affordable housing tenants at Rector Square, did not return phone calls for comment. Levy not return calls either.

Levy, whose company YL Real Estate Developers has been hit with $3.15 million in mechanic’s liens from 20 subcontractors or suppliers in the past three months at condo conversion Park Columbus, did not return calls either.

Cooper Square Realty president David Kuperberg, whose company manages Rector Square, 20 Pine and other downtown properties, said he could not comment on Rector Square.

Battery Park City Authority officials said they have been in touch with tenants and buyers at Rector Square, who are facing the potential loss of heat and other utilities, since Levy failed to pay thousands of dollars in PILOT payments to the Authority since mid-2008.

“We’re very concerned about what’s going on at 225 Rector,” said Leticia Remauro, spokeswoman for the Battery Park City Authority.

Assembly Speaker Sheldon Silver’s office is scheduled to hold a meeting this afternoon with Rector Square buyers, tenants, Anglo Irish Bank, officials from Attorney General Andrew Cuomo’s office, Battery Park officials and other local politicians. Buyers at the building are also considering an offer to join the lawsuit as plaintiffs against Levy.


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