Boymelgreen, Africa Israel settle with AG over 20 Pine construction defects

But developers face a new $20 million suit over condo project
By David Jones | May 25, 2012 02:30PM

The developers of 20 Pine Street, led by Africa Israel USA, have settled a probe by Attorney General Eric Schneiderman for allegedly covering up construction defects at the troubled condominium, but are facing a new $20 million lawsuit from unit owners over the same charges, The Real Deal has learned.

Jesheyanu “Shaya” Boymelgreen and Tamir Kazaz, president of AFI USA, signed an agreement to pay $144,000 in fines to the state and allow prospective buyers to rescind their contracts. The developers failed to disclose a Rand Engineering report listing $5.6 million in defects, ranging from cracking throughout the building, mold in the sauna, damaged heating systems and other problems, according to documents filed with the AG.

“Despite repeated attempts by members of the condo board who were unaffiliated with the sponsor to disclose the Rand report, sponsor would not permit dissemination of the Rand report and didn’t amend the offering plan to disclose the Rand report or contents thereof,” assistant AG Jensen Ambachen wrote in the settlement agreement.

The luxury condo has had a troubled history since its conception. Africa Israel teamed up with Boymelgreen, once one of New York’s biggest condo developers, to convert the former Chase Manhattan offices to a luxury 28-story condo tower.

AFI USA took control of the building from Boymelgreen in 2009 after 50 unit owners revolted against months of construction delays, poor sales and questions about its financial stability.

The probe followed a $120 million lawsuit in Manhattan Supreme Court in August 2011 by the 20 Pine Homeowners Association against the developers alleging the sponsor covered up the Rand report, illegally converted funds, failed to fix the defects and misrepresented the quality of the building. That suit was filed by attorney Adam Leitman Bailey.

The unit owners also alleged that the developers failed to obtain a permanent certificate of occupancy, which would result in AFI losing control of the board, and allowing unit owners full access to financial records and other documents. The developers claim the building is 95 percent sold, according to court records, which unit owners claim is more than sufficient to get a permanent certificate. The city Department of Buildings was checking to confirm the status of the temporary Certificate of Occupancy.

On May 17, Justice Paul Wooten dismissed nearly all of the allegations against the defendants, which included most of the building contractors; however, he allowed two key counts to remain against the developers.

A new $20 million lawsuit was filed on May 21 by attorney Alexander Tuttle, of LePatner & Associates, with virtually the same allegations against the property, but with new lawyers representing the unit owners. According to the suit, the AG is examining similar problems against AFI or Boymelgreen affiliated buildings at 15 Broadway in Manhattan, as well as two Brooklyn properties.

AFI was forced to enter a similar settlement with the AG in 2011, when The Real Deal uncovered an amendment to the Apthorp condo offering plan that stated the project would not be harmed by the sale of the building loan by Anglo Irish Bank. The developers in September 2011 filed suit against the bank alleging the sale of the loan would threaten the conversion’s viability, and was forced to offer refunds to buyers.

AFI USA and Boymelgreen officials could not be reached for comment, while attorney Aaron Abraham, representing the developers, declined to comment. A spokesperson for 20 Pine Street referred calls to the spokesperson for Africa Israel, who did not return calls.