Ruling hands Africa Israel win in Downtown Condominium battle

Court says developer does not have to cede control of board to unit owners – for now

Eric Schneiderman and Shaya Boymelgreen
Eric Schneiderman and Shaya Boymelgreen

A Manhattan Supreme Court judge partially granted a temporary restraining order to Africa Israel yesterday. The order means the developer does not at this time have to cede control of the Downtown Condominium board to unit owners, following a February lawsuit against the developers by state Attorney General Eric Schneiderman.

Judge Debra James ruled that AFI and co-developer Jesheyahu ’Shaya’ Boymelgreen are still required to hand over years of the condo’s financial documents and deposit $470,000 into an escrow fund as a down payment required to obtain a permanent certificate of occupancy. In addition, a temporary ban prohibiting the developers from selling condos and coops will remain in place, according to a spokesperson for the AG.

“They are still banned from securities,“ said Melissa Grace, a spokesperson for the AG, in an email. “The only thing (changed temporarily) was the transfer of board control to the residential unit owners.”

Schneiderman filed suit against the developers last month alleging they failed to obtain a certificate of occupancy by failing to complete remaining construction defects. The AG also alleged that the pair misappropriated more than $9 million placed in an escrow account to finance those repairs.

A 2009 lawsuit filed by the condo board against the developers alleges that the building is rife with construction defects, ranging from water leaks to poor ventilation, exposed wires, defective or missing fire safety and fireproofing material and other problems. The AG claims that when his office launched an investigation in 2011, the developers stonewalled and dragged their feet when asked to turn over documents.

The Attorney General also alleges that the developers sold all of the condo’s 382 residential and 18 retail units between 2006 and 2008, generating at least $360 million. The suit claims that the developers set up a $9.4 million escrow fund to make the needed repairs for a permanent certificate of occupancy. The fund was depleted, the suit alleges, after the developers promised the money would be held at Citibank, but instead deposited the money at Liberty Pointe Bank, a failed financial institution where Boymelgreen was chairman.

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Attorney Aaron Abraham, representing both Africa Israel and the sponsor of 15 Broad, claimed in an affidavit filed yesterday, that Africa Israel, an Israeli development firm led by billionaire Lev Leviev, never signed any documents claiming to be a sponsor of the building, noting that the sponsor principals were Boymelgreen and Pinchas Cohen.

“Moreover the NYAG fails to allege how any of the AI Parent Companies constructed, marketed or sold units at the condominium or otherwise engaged in any conduct that could possibly subject them to Martin Act liability,” he stated, citing language from the AG that the Boymelgreen Developers held day to day management authority over the sponsor.

However, The Real Deal has obtained a 2011 affidavit by Damien Stein, chief operating officer of Africa Israel’s U.S. unit, in which he states that he was appointed a board member at 15 Broad by the sponsor. Steve Sladkus, who represents unit owners in the 2009 civil suit, claims that Stein was president of the board. When The Real Deal asked about Stein’s relationship with Africa Israel and the condo, a spokesperson for 15 Broad confirmed that Africa Israel is a member of the sponsor.

Stein, in his affidavit, also says the developers are trying to get a permanent certificate, but since the commercial spaces are spread out across several different buildings, and part of the commercial space was sold to a third-party owner, the process of obtaining the certificate is difficult.

Sladkus blasted Africa Israel for trying to separate itself from the sponsor entity.

“Africa Israel’s disclaimer of responsibility as part of the sponsor of the condominum is mind-boggling,” said attorney Steve Sladkus, who represents unit owners at the condo. “They partnered up with Boymelgreen — they need to deal with the fallout of that.”

Abraham did not return calls. Boymelgreen could not be reached for comment.