Witkoff closes on 1107 Broadway for $191M

<i>Tessler says pending litigation surrounding the project has been dropped</i>

From left: Steve Witkoff, founder of the Witkoff Group, 1107 Broadway, Yitzhak Tessler of Tessler Developments and Eastdil Secured’s Adam Spies and Douglas Harmon

Steve Witkoff’s Witkoff Group has completed its purchase of part of the former International Toy Center building from Lehman Brothers Holdings for $191 million, Lehman announced yesterday, following a bankruptcy auction by Eastdil Secured in June. Witkoff is planning a $290 million condominium conversion of the property, at 1107 Broadway, featuring 145 units, in collaboration with a Morgan Stanley real estate fund.

Eastdil Secured brokers Adam Spies and Doug Harmon represented the seller in the deal, and brought the buyer and seller together.

The closing of the 16-story office building follows the sale of 200 Fifth Avenue earlier this month, which was previously the main Toy Center building, for $726 million.

“Since Lehman’s bankruptcy filing, we have followed a strategy, with creditors’ committee support and court approval, of holding and investing in certain assets in order to achieve a better return than would have been possible had we sold them in 2008 and 2009,” said Jeff Fitts, a managing director at professional services firm Alvarez & Marsal, who heads Lehman’s real estate group. “It was clear to us that many of Lehman’s real estate assets had intrinsic value that would not be realized if they were sold in a fire sale in the depths of a recession.”

The building has had somewhat of a tumultuous history.

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Yitzhak Tessler’s Tessler Developments purchased 1107 Broadway in 2007 for $235 million from the Chetrit Group. Tessler had plans to add eight floors and develop 187 luxury condo units at the site.

Then, in 2010, the bankrupt Lehman sued Tessler and his company 1107 Broadway LLC to foreclose on a $136.8 million loan on the property. According to the lawsuit, Lehman provided 1107 Broadway LLC with the $136.8 million loan to finance the purchase of the property.

Tessler said that all litigation surrounding the building has now been dropped.

“There was no default and there was no foreclosure,” he said today. “We settled with Lehman. They got their money and we got ours. No one is walking away with big losses.”

A source close to the deal said: “Witkoff now owns the title of the building free and clear, but technically speaking, there were others involved who were equity partners but they were underwater.”

The source added: “It was almost a short sale. The original capital stack was in the neighborhood of $340 million, but it might be more accurate to quote the amount of the senior mortgage, which was $250 million.”

The two Toy Center buildings — at 200 Fifth Avenue and 1107 Broadway — representing more than 1 million square feet in total, were previously a hub for toy manufacturers and distributors in the United States.

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