UPDATED: The owners of the Upper West Side’s Apthorp condominium, led by Africa Israel USA, have lost control of the long-troubled Renaissance Revival apartment house to mezzanine lender Area Property Partners, according to documents obtained by The Real Deal.
Irish Bank Resolution Corp., the Irish government entity that took over Anglo Irish Bank, sold the Apthorp’s mortgage debt to Arefin U.S. Investment, an affiliate of Area, and that deal closed Aug. 10, according to documents filed with New York Attorney General Eric Schneiderman. The $385 million mortgage debt, had a balance of $225 million at the end of 2011.
As part of that loan sale, a new $125 million loan was issued by Australia’s Macquarie Bank Ltd., and a new $60 million senior mezzanine loan was issued by Macquarie and Arefin. The senior mortgage will mature in August 2014, while $99.7 million of senior mezzanine loans are due by 2016 and $62 million in junior mezzanine debt by 2017.
The owners, including investor Ralph Braha, AFI chairman Tamir Kazaz, former Africa Israel CEO Izzy Cohen and Andrew Ratner, executive vice president of Broadwall Properties, a part owner and managing agent of the property, have all resigned from the board of the Apthorp.
An Arefin affiliate called 79th Street Legacy Mezzanine has taken control over the Apthorp board of directors, naming Area Chairman William Mack, CEO Lee Neibart and Bradford Wildauer, a partner and head of U.S. debt funds, as principals of the sponsor group. The building’s new board of managers will include Neibart, Mack and William Friedland, who bought the building’s commercial space in 2011.
Area said that the Apthorp was recapitalized in a deal that gave it “control over Apthorp Associates” the sponsor of the condo, according to a statement. “In accordance with the amendment, Area controls the board of the sponsor and directs operations at the property,” a spokesman for Area told The Real Deal.
Area said that Apthorp Associates will direct operations at the property, Broadwall Management of Apthorp and Broadwall Consulting will continue as project manager and owners representative at the property and that Corcoran Sunshine Marketing Group will continue as marketing and sales agent.
Africa Israel officials downplayed the language in the filing, claiming that they gave “additional rights” to Arefin in return for a release of guarantees connected with the debt. They also claimed that they continue to own half of the sponsor group and that major financial decisions must be still be approved by them.
“They have a participation on major decisions but cannot make major decisions by themselves,” Kazaz told The Real Deal.
Brad Wildauer, partner and head of U.S. Debt at Area Property Partners, in a statement released to the Real Deal, said he had a signed agreement that contradicts the claim by Kazaz. “As a condition to the recapitalization Arefin signed an agreement . . . whereby control over all major decisions of the property was ceded to Arefin.”
Additionally, a legal source familiar with the discussions with Schneiderman’s office, confirmed that Africa Israel gave up control of the Apthorp sponsor group to Arefin. “It’s pretty clearly spelled out that they ceded control to the lenders,” the source told The Real Deal.
The building’s unit owners still have no representation on the board, and that will remain the case until 180 days after a majority of the building’s residential units are closed or July 2015, the fifth anniversary of the building’s first residential sale. So far only 50 apartments, or 31 percent of the 163-unit, 422,000-square-foot property, have sold.
The loan sale ends a rocky tenure for AFI, an affiliate of Lev Leviev’s Africa Israel, an Israeli-based real estate and diamond conglomerate. AFI took control of the property after a bitter legal fight with former owner Maurice Mann, who almost lost the building to foreclosure in 2009.
Leviev joined Mann in 2007 to buy the legendary rental building for a record $426 million, which was the single largest price for a residential U.S. building on a per unit basis. Leviev later took Mann to court, accusing him of mismanaging the building.
AFI later ran into its own legal problem, after Anglo Irish threatened to sell the mortgage in a massive $9.5 million fire sale of its entire U.S. portfolio. The Real Deal reported that the Apthorp owners filed false documents with Schneiderman’s office claiming that the loan sale would have no affect on the project, however in September 2011, filed suit against Anglo Irish alleging that a loan sale would potentially cripple the project.
Schneiderman’s office forced Africa Israel to temporarily halt sales, fined the owners and ordered them to offer refunds to buyers under contract. The bank then got permission from a state Supreme Court judge to sell the debt, but it took months to land a deal because of language that allowed the owners to veto a sale of the mortgage debt.
It remains unclear what will happen to the Apthorp, going forward, as the building, once home to celebrities such as Nora Ephron, Conan O’Brien and Rosie O’Donnell, has previously cut prices. About half of the property is occupied by rent-stabilized tenants that are protected from eviction. According to Streeteasy.com, the property has 16 apartments listed at an average price of $2,259 a square foot.
Africa Israel and Broadwall officials. lawyers for the sponsor group, and Area Property officials were not immediately available for comment. A spokesman for Schneiderman was not immediately available, nor were lawyers for Anglo Irish.