Manhattan House developer maintains building still financially solvent

By David Jones | February 24, 2009 01:53PM

 Attorney Adam Leitman Bailey represents angry tenants and buyers at Manhattan House

Amid widened concerns about the financial stability of the Upper East Side condominium Manhattan House, its developer O’Connor Capital Partners said it remains current on its construction loan with HSH Nordbank and that the bank has not foreclosed on the building.

“Manhattan House is a borrower in good standing with our lender; it is a performing loan, and [it has] nearly three years of [a] remaining term with a right to extend,” Brian Fallon, president of O’Connor Capital, wrote in a letter to residents obtained by The Real Deal.

German lender HSH Nordbank shut down its U.S. lending operation in late 2008, after a deal to syndicate the $750 million loan for Manhattan House fell apart.

Nordbank is looking for a new sponsor to take over management of the building at 200 East 66th Street, according to sources familiar with the discussions, however it cannot find a developer willing to manage such a large conversion project.

Nordbank officials declined repeated requests for comment in recent weeks, however in a statement released in Hamburg today, government regulators have signed off on a broad realignment of the bank. The proposed realignment includes the sale of all non-strategic units and portfolios, including the sale of its real estate business in Western Europe. Fallon was not immediately available for comment.

In addition, several major U.S. lenders have refused to finance apartment purchases at Manhattan House, amid tightened Fannie Mae guidelines. Wells Fargo and Bank of New York Mellon have pre-approved the building, however officials say only 65 sales in the 583-unit building have officially closed.

O’Connor has been at loggerheads with buyers and more than 200 tenants for months after the sponsor fell behind on its construction schedule and buyers encountered problems obtaining mortgage loans.

O’Connor has offered tenants a month’s free rent, plus the cost for legal expenses, to avoid a potential lawsuit over the state of repairs at the building, according to the letter. Dozens of other buyers have threatened to file suit against O’Connor or walk away from their deposits, due to the inability to get financing, construction delays or general concerns about the building’s financial stability.

Attorney Adam Leitman Bailey, who represents tenants and a group of buyers at Manhattan House, declined to comment.

In a separate case, ACM Environmental Remediation filed suit against Manhattan House last month, seeking a judgment for $134,500 in construction costs, according to court documents obtained by The Real Deal. Manhattan House officials did not return calls regarding the case.