Affiliates of Ceruzzi Properties have agreed to a $29 million judgment after failing to make payments on a $155 million construction loan tied to the troubled Hayworth condo project.
Executors of the estate of Louis Ceruzzi and BVS Acquisition Co. — an LLC tied to Ceruzzi Properties— will pay lender Children’s Investment Fund after allegedly defaulting as guarantors on the loan at the partially built Upper East Side tower, court documents show.
Children’s, a U.K-based hedge fund, was initially only seeking $10 million from the affiliates for failing to make interest payments between March and September 2020. But since Children’s filed its lawsuit in October, Ceruzzi failed to make any additional payments, increasing the amount owed to $29 million.
The judgment marks the latest setback for the 61-unit Hayworth project. Ceruzzi and Kuafu Properties spent $118.6 million assembling the site at East 86th and Lexington Avenue between 2013 and 2014. By the time sales launched for the 21-story luxury condo in 2019, the market had weakened significantly.
After the pandemic hit, Ceruzzi struggled to secure rescue financing for the project. A broker at JLL had also pitched prospective investors about buying out Ceruzzi’s position.
In May 2020, Ceruzzi president Art Hooper said the company was considering selling condos or renting units in the building. “Or is there a possibility of somebody coming in and investing in the building?” he said. “Or maybe selling all the residential units to a bulk buyer…Or some combination of all of the above.”
Guarantors of the Hayworth project’s loans are facing challenges with other lenders besides Children’s.
There are “numerous lenders who are seeking payment and our client is trying to resolve them,” said Neil Leiberman, who represents the executors of Ceruzzi and BVS Acquisition, during a July hearing, court documents show.
The Hayworth isn’t Ceruzzi’s only project that has had setbacks since company founder and president, Louis Ceruzzi died in 2017.
In March, Industrial Bank of Korea filed a lawsuit seeking $40 million in damages after Ceruzzi allegedly defaulted on a $110 million loan backing Centrale, a 72-story, 124-unit condo tower in Midtown East. The state-owned bank was acting as trustee for an investment trust.
Children’s, meanwhile, has provided loans to some of New York’s largest developers, including HFZ Capital. A Children’s subsidiary is seeking to foreclose on HFZ’s stake in its luxury condo development known as the XI on the Far West Side.
An attorney for Ceruzzi did not immediately return a request to comment nor did an attorney for Children’s Investment Fund.