A 16-story Upper West Side apartment building mired in a dispute between a woman and her aging stepfather that bounced among New York, Florida and California courts, is scheduled to be sold at auction in May, with bids starting at nearly $18 million, federal bankruptcy records show.
The woman, Claudia Raffone, who lives in Beverly Hills, Calif., and the stepfather, Henry Douglas Campbell, of Manhattan, have battled each other since at least 2003 over the 49-unit building at 114 West 86th Street, located between Columbus and Amsterdam avenues.
But on Wednesday, the ownership dispute moved closer to resolution, when a federal bankruptcy judge in California set a May 4 date to sell the property at auction, bankruptcy records show.
The first official bid that sets a lowest price, known as the stalking-horse bid, was entered by Midtown-based Bernstein Real Estate, at $17.95 million, bankruptcy court records show. The sale is being handled by Lipa Lieberman and David Schechtman, brokers with investment sales firm Eastern Consolidated.
Bernstein, a real estate investment company headed by Asher Bernstein, the principal and president, owns about 2 million square feet of commercial property in New York City, the firm’s website says. The company declined to comment. It is affiliated with residential management firm Lawrence Properties.
Insiders expect heavy interest from additional bidders for the apartment building that has 30 rent-regulated tenants providing so-called “upside potential.” That is because if such a tenant is removed the rent can be raised, in some cases dramatically. The lowest paying rent-controlled tenant pays $627 per month, while the highest-paying free market tenant writes a check for $4,250 each month, according to a rent roll for the building, provided to The Real Deal. In addition, cash-rich buyers are being pressured by their funding sources to make acquisitions, but the market has remained slow compared with the boom years.
“There is nothing in the world today that is more sought after than residential in New York City,” which is pushing up prices, investment sales broker Yoron Cohen, an executive managing director at Jones Lang LaSalle, said. He is not involved with the sale of the property.
The property generated more than $947,000 in rent in 2010, with a net operating income of just over $117,000, private documents provided to The Real Deal show.
There were $3 billion in Manhattan property sales in the first quarter of 2011, a sharp increase from the $2.1 billion sold in the first quarter of 2010, figures from investment firm Massey Knakal Realty Services show. But that is just a fraction of the approximately $17 billion that traded in the first quarter of 2007. And just $100 million of elevator apartment buildings sold in the first three months of this year in Manhattan.
Lieberman said the property has been underutilized because of the ownership dispute. Schechtman added that, “for nearly a decade this has been a rudderless ship.”
The seeds of the dispute began years ago, when Campbell, originally from the island of Jamaica, married Traute Raffone, Claudia’s mother, in the late 1960s or early 1970s. The exact date and even the existence of the wedding have been disputed.
In 2003, Claudia says in legal documents that Traute executed a will giving Claudia, her only child, control of the estate, while Campbell says in fact he was given control through a will signed later that year. Claudia contested the estate in Palm Beach County, starting in 2003.
Then in February 2010, three years after Traute died in 2007, a Florida probate court entered a judgment awarding Campbell $2.5 million in damages, attorneys’ fees and Claudia’s interest in the Manhattan apartment building. A week later he filed a lien in New York stating he now owned the property, and even tried to sell it, appraised at $18 million.
To fight back, Claudia quickly appealed the Florida probate order and in March 2010 filed a lawsuit in New York State Supreme Court saying Campbell was not the owner, and that she remained the true owner and operator of the property, held in the name of a company called Nevada Star.
The dispute over title led tenants to withhold rent, and brought on a default of the $8 million first mortgage loan given by Madison Realty Capital, among other problems, court records show.
Then just a day before a New York state judge was going to Hold A Court-ordered auction meant to resolve the legal wrangling, Claudia, who still controlled the building through Nevada Star, filed for chapter 11 bankruptcy in Los Angeles in May 2010.