New Sheffield owners group questions building’s finances

TRD New York /
Mar.March 13, 2009 05:48 PM

A newly formed homeowners group at the Sheffield57 condominium has retained council amid questions about the building’s reserve fund and allegations that developer Kent Swig of Swig Equities failed to complete construction on the building’s common areas, according to documents obtained by The Real Deal.

In a letter distributed to residents, the Sheffield Owners Association claims that Swig has not disclosed any new information about the building’s finances since a June 2008 amendment, when the reserve fund had a balance of $3 million.

The owners cite the building’s offering plan, which says the sponsor should have $26 million in the reserve fund set aside for capital improvements and deferred maintenance, and that as of the June 2008 amendment, Swig had sold about half the building’s units, leaving a balance of $8 million to $13 million.

“Needless to say, it appears that as of at least mid-2008, there was a serious question as to whether [Swig Equities] was in compliance with its obligations regarding the funding of the reserve fund,” the owners wrote in the letter.

The writers said that in December they requested Sheffield57’s audited financial statements for 2007, but were told they had not been started.

They also claim that in the June 2008 amendment, the sponsor disclosed he was $2.5 million in arrears on common charges. Finally, they say that a meeting of the condo board has not been called, even though one is required 180 days after a majority of the units have been sold. 

Regarding construction, the owners’ letter claims that the building’s spa, fitness center, restaurant, lounge, elevators and new roof have not been completed.

The group has retained the law firm of Braverman & Associates, and has planned a meeting for next Wednesday at the Colonade condo at 347 West 57th Street.

Sheffield57 officials said they would make themselves available to the homeowners.

“We welcome the opportunity to discuss any questions Sheffield57 buyers may have following the meeting they may hold,” said a spokesperson for 322 West 57th Street LLC, the Swig Equities affiliate that owns the building.

The meeting comes amid increased questions about the building’s ownership and financial viability, as well as a rising tide of anger among condo owners across the city.

For example, owners at 20 Pine, Manhattan House and other buildings have organized to raise questions about construction and finances.

Swig, Yair Levy and Serge Hoyda acquired the Sheffield, later renamed Sheffield57, in 2005 for $418 million, making it one of the biggest residential deals in New York history. In January 2009, Swig said it had closed more than $450 million in sales, representing 59 percent of the building’s available units, in a statement.

In January, Lehman Brothers filed suit to foreclose on Swig’s Failed 25 Broad Street condo conversion and 45 Broad, his planned Nobu Hotel condo with actor Robert DeNiro.

Later in January, Square Mile Structured Debt filed suit alleging that Swig defaulted on $39 million in loans for 25 Broad and Sheffield57, and that the developer misrepresented his true stake in the Sheffield. As reported by The Real Deal, Square Mile alleged that Swig originally claimed he owned 99.98 percent of a firm called SE West 57 Capital, which owns 29.98 percent of the Sheffield. However, Square Mile alleged that Swig really only owned 30 percent of the SE West 57 Capital, which means that Swig owned a lower percentage of the Sheffield than he originally claimed.

In a Feb. 20, 2009 court filing in New York State Supreme Court, Swig admits that a company called Shefa 57 owned 70 percent of SE West 57 Capital, but claims that he informed Square Mile of that fact in prior correspondence.

Swig is also facing millions of dollars in lawsuits and mechanic’s liens by contractors who allege they have not been paid.

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