It’s a New York condo buyer’s worst nightmare.
Three of them put down $11 million apiece for an “exclusive residence” in an elegant pre-war building with a landmarked facade in one of “the world’s finest neighborhoods,” only to see the condominium become nearly insolvent because of the developers’ bizarre family feud.
Building staff — at least the ones who haven’t already walked off — have been forced to take their meals on a chair in the rat-infested basement for more than a year. Flood damage to the unsold units remains unrepaired. And the buyers, after prepaying common charges to keep the building solvent, recently learned one of them was arrested for insider trading.
And then they got the bad news.
“Dear Owners, I am sorry to say we are officially out of money,” the building manager for the 40 East 72nd Street condominium emailed to unit owners last week. “Payroll may or may not go through this week, it simply depends on who cashes checks first.”
Residents of the seven-unit Upper East Side condominium sued the project’s sponsors — shipping magnate Spiros Milonas and his wife Antonia — in June to save their building from financial disaster. But things have since gone from bad to worse, reams of court documents show. Representatives for the parties in the dispute did not respond to requests for comment.
The attempt to salvage the struggling condominium got off to a promising start in August when the court ordered that the three plaintiff unit owners be appointed to the condo’s board of managers, with each of them entitled to two votes — giving them an apparent majority.
But there was a catch: decisions related to “financing, loans or letters of credit” would require a supermajority of seven votes, meaning that at least one of the three other board members — Spiros, Antonia, and an employee — would need to side with the plaintiffs. Those three members have so far rejected all financing proposals, which would use the sponsor-owned units as collateral.
“Plaintiffs were purporting to require up to $40 million of security on a loan not to exceed $1 million,” Antonia Milonas’ attorney wrote to the court last month. “Thus, apart from all other terms involved, in the event of nonpayment, a reasonably foreseeable prospect, Axia could lose four valuable condominium units at distress prices.”
Other attempts to fund the building’s operations also hit dead ends. The unsold units cannot be sold because the building’s condo plan has expired — and cannot be amended unless the sponsor is solvent, court documents show.
Antonia Milonas’ attorney has proposed renting out the unsold units, but that would first require flood damage to be repaired, and the plaintiffs’ efforts to foreclose on those units would likely discourage potential renters. The building also lacks a valid certificate of occupancy.
Meanwhile, the building’s operations have continued to struggle. “We’ve had some challenges with the staff in the last week,” the building manager told the condo board at a meeting two weeks ago, according to transcripts. “We had a report that one of the employees over the weekend did not show up for his job.”
The working conditions certainly haven’t helped morale. “One of the things that we’ve spoken about is getting a proper place for them to change their clothes, to take their breaks, to go to the bathroom,” the manager said. “We have a plan to create a space for them, but no money to do it. So now it’s been 18 months that the guys literally are eating in the basement on a chair.”
To top things off, in between two heated condo board meetings, one plaintiff was arrested on a federal indictment last month. Telemaque Lavidas, the owner of the fifth-floor unit, faces multiple securities fraud charges related to an alleged insider trading scheme.
In any case, as long as the Milonas family feud remains unresolved, 40 East 72nd Street faces a daunting path to solvency.
“I know it’s a sideshow of a bigger fight, but ultimately you could have a story in the paper that says people aren’t getting paid,” judge Alan Marin warned the parties in court early last month. “Forty percent of the units aren’t getting services. You don’t have a certificate of occupancy. The fire department’s come by because somebody’s using this as a lever … in a bigger fight somewhere else.”