Related settles majority of One Madison claims, sets condo relaunch for late 2012
Related Companies has reached a deal to settle most of the outstanding claims — estimated to be in the tens of millions of dollars — in the ongoing legal drama at the One Madison Park condominium and expects to relaunch sales late this year, The Real Deal has learned.
The settlements, which include $6.75 million in unsecured claims and several million in additional claims, will allow Related to complete construction at the site and resolve a number of outstanding title disputes at the property, at 23 East 22nd Street, which would allow the developer to put most of the unsold inventory back on the market.
“Quite candidly, we expect to confirm the plan,” said attorney Derek Abbott, who represents the debtors, including FKF Madison Group Owner, meaning the plan would be approved by the court.
Abbott warned that other claims, including disputed ownership of apartments, will likely be forced into New York state Supreme Court, but a U.S. Bankruptcy Court hearing is scheduled next week to confirm a reorganization plan and eventually relaunch sales. But regulatory sources said that no new filings regarding One Madison have been submitted to the state attorney general since 2010.
The AG would have to approve an amendment to the One Madison Park offering plan that updates buyers about the litigation, an eventual new broker other relevant information.
The settlements follow a January decision by U.S Bankruptcy Court Judge Kevin Gross to send millions of dollars in claims back to the New York state Supreme Court, after lawyers were unable to come to a resolution.
The condo had been in bankruptcy since June 2010 after a group of three creditors, including Krauss High Tech Home Automation and the Krauss family, filed an involuntary bankruptcy petition, citing $11.6 million in unpaid loans and contractor fees for home theater equipment.
Attorney Barry Slotnick, who represented the Krauss family and company in the bankruptcy filing, declined to comment on the specifics of the settlement, but expressed confidence that the agreements will allow the project to move forward.
“We’ll continue to service this building as best we can,” he said, referring to Krauss High Tech, which supplies home theater and security systems.
The goal of the bankruptcy was to force the original developers, led by Ira Shapiro of Slazer Enterprises, to pay off millions of dollars in defaulted loans and mechanics liens filed by contractors. Senior lender iStar Financial filed to foreclose on the project, citing more than $220 million in defaulted mortgage loans and more than $40 million missing and unaccounted for, raising fears that no money would be left once the foreclosure was completed.
Related, which took over One Madison after junior mortgage lender Amalgamated Bank bought iStar’s loan and hired them to take over the project, realized that it would have to settle the outstanding claims in order to get the project restarted. HFZ Capital, which spent more than a year negotiating to acquire the debt at One Madison, is part of the development team, after battling Related in court over the project.
McDonald’s, which sued the original developers for allegedly reneging on a plan to open a location at the site, where the fast-food chain previously owned, is working on a deal to resolve the dispute.
“We are seeking a mutually beneficial resolution to this matter,” said McDonald’s spokesperson Cheryll Forsatz.
HFZ officials did not return calls seeking comment.