Istar FM Loans has filed a foreclosure suit in New York State Supreme Court against developers Yitzchak Tessler and Meyer and Jacob Chetrit after the investors allegedly defaulted on a $105.3 million loan to develop a mixed-use tower near Herald Square.
In March 2007, Tessler Developments and the Chetrit Group entered into a loan agreement with Fremont Investment & Loan to acquire 855 Sixth Avenue, a site near 31st Street. The loan was part of a massive portfolio that Fremont, one of the nation’s largest subprime lenders, sold to Manhattan-based Istar Financial.
Chetrit Group acquired 855 Sixth Avenue as part of the $140 million purchase of several office buildings from Baruch Singer in March 2007. Meyer and Jacob are two of the five brothers who operate the Chetrit Group.
Chetrit and Tessler hired architect Costas Kondylis to design the 632,000-square-foot project, which was set to include up to 240,000 square feet of retail space, more than 10 floors of office space, up to three floors of parking and residential condominiums. The developers planned to complete the construction by 2010.
Winick Realty was named the exclusive leasing agent for the new building, however it remains unclear whether Winick found any new anchor tenants for the site. In 2007, Winick officials said the site would include 21,000 square feet of retail space on the lower level as well as the ground floor, and 30,000 square feet on the second floor.
Officials at Winick, which was not named in the suit, declined to comment.
Court records show the original loan maturity date as April 1, 2008, however that original date was extended by six months to October 1, 2008. Istar said it warned of a default in an October 3 letter and then declared a default by mail two weeks later.
Istar says the default includes a $101.49 million principal balance, $962,868 in interest, default interest of $1.4 million and an exit fee of $2.1 million. Court records show an additional $2.4 million is owed in personal guarantees from Tessler and the two Chetrits.
Neither officials at the Chetrit Group nor Tessler Developments was available for comment.
Kondylis, construction firm Pavarini McGovern and consultants George Langer Associates Consulting and Environmental Consulting and Management, each had mechanic’s liens against the property and were therefore named as defendants in the suit, according to court records.