One Mad. bankruptcy judge moves creditor disputes back to NY

Move forces part of case to start from scratch in state court after 1.5 years in bankruptcy court

TRD New York /
Jan.January 22, 2012 12:00 AM

Judge Kevin Gross, in an opinion released yesterday, said the case involving the luxury tower at 23 East 22nd Street, is placing an untold burden on his courtroom and cited an inability and unwillingness of the various parties to resolve several key disputes in the bankruptcy. The decision forces part of the case to start from scratch in New York State Court after 1.5 years in Bankruptcy Court in Delaware.

“These adversary proceedings are extremely contentious and there is minimal cooperation among the parties,” Gross wrote in his opinion. “It’s fair to say the parties won’t agree on what day it is.”Attorney Barry Slotnick, who represents several creditors, led by Mitchell and Barbara Kraus, who initiated One Madison Park’s involuntary bankruptcy in 2010, said he planned to pursue his claims in State Supreme Court.

“We will commence an action with regard to the fact that we’re owed many millions of dollars — or four apartments,” Slotnick told The Real Deal.

Slotnick initiated the bankruptcy case in Delaware because the condo developers were incorporated there, and by moving the case to Bankruptcy Court, Slotnick had a better chance of collecting money owed to his clients. In state court, the senior lenders would have taken nearly all of the money without having to pay out junior creditors.

IStar Financial filed to foreclose on One Madison Park in 2009 after defaulting on more than $200 millions in loans. As The Real Deal  first reported, Ira Shapiro, the original co-developer of the property has been under investigation for forgery and other charges after millions of dollars in private loans and other funds were allegedly misappropriated and individual apartments to multiple parties in return for private loans designed to complete the condo.

Amalgamated Bank, a junior lender at the property, acquired the defaulted debt at the building and brought in Related Cos., to take over the property.  Eventually an agreement was worked out to allow Related and Ziel Feldman’s HFZ Group to complete the project after a lengthy legal fight in Bankruptcy Court.

A source familiar with the case noted that the judge plans to continue hearing the main arguments in the bankruptcy case, and a reorganization plan is expected to be completed later this year under the same judge.

“These are individual unit claimant disputes where the venue is being changed,” said a source familiar with the case. “It still looks like we will be out of bankruptcy in a few months.”

Feldman, who had not actually read the judge’s opinion when reached by The Real Deal, agreed that the decision would have no impact on the central bankruptcy case.

But, other lawyers in the case noted that serious disputes remain not only over title to the individual apartments, but over the very land that the condo sits on.

“This is a setback that clearly will slow them down, but might wind up finding a final resolution,” said Herrick Feinstein attorney Ray Hannigan, who represents McDonald’s, which owned some of its land under the condo building and was promised a retail space at the property.


Related Articles

arrow_forward_ios
Related's Jamar Adams and Steve Ross with 14-06 Gateway Boulevard (Credit: Getty Images and Google Maps)

Related is the latest developer to target the Rockaways

Huizenga lobbied Rick Scott to secure Opportunity Zone designation for West Palm site

Huizenga lobbied Rick Scott to secure Opportunity Zone designation for West Palm site

Facebook CEO Mark Zuckerberg and Hudson Yards (Credit: Getty Images)

It’s official: Facebook is taking 1.5M sf in Hudson Yards

15 Hudson Yards (Credit: Related-Oxford, iStock)

First he sold a plot of land to Hudson Yards’ developers. Now he owns 7 luxury condos there

The Plaza Hotel in 1975 and models walking the runway during New York Fashion Week September 2019 (Credit: Getty Images)

Fashion Week struts its stuff at these iconic NYC locations

From left: A rendering of 425 Park Avenue, iStar CEO Jay Sugarman, and Nuveen managing director Nadir Settles (Credit: rendering via L&L Holding/Sugarman by Emily Assiran/Settles via Nuveen)

iStar-managed REIT signs $620M contract to buy ground lease at L&L’s 425 Park

Related CEO Jeff Blau, Deutsche Bank CEO Christian Sewing, and Time Warner Center at 10 Columbus Circle (Credit: Getty Images and Wikipedia)

Deutsche Bank shrinks footprint at future Columbus Circle home amid global downsizing

Vito Errico's home at 21 Sterling Road in Armonk

Gym chain creator looks to part ways with Westchester County compound

arrow_forward_ios