Refinancing old debt on a property is a routine measure. But shareholders of an Astoria complex fear another loan would be a means of covering up years of corruption at the long-troubled property.
Michael Leifer, who owns 70 of the 618 units at Acropolis Gardens, brought a derivative shareholder suit against the co-op board and longtime property manager Steve Osman, alleging that Osman had used the complex as his own personal piggy bank, misappropriating millions of dollars over the years. Further, Leifer claims that board members were complicit in those actions.
Now, shareholders are gearing up for the co-op’s first annual meeting in eight years. In that time, the debt on the property has more than quadrupled, public records show. And maintenance fees have risen more than 40 percent, the suit claims, amid years of resident complaints of poor conditions, including asbestos exposure and a months-long period without hot water.
“We are paying more money a month, getting less in return and getting deeper in debt,” said Michael Solomon, another shareholder who has lived in the complex for 10 years and says he’s had ceiling leaks since 2015.
The annual shareholders meeting, scheduled for Nov. 19, comes after a Wells Fargo managed-trust moved to foreclose on the property after a loan repayment bounced in July. A Wells Fargo-recommended receiver was appointed last month to audit the co-op’s financials, and take over its property management.
But in a move that would replace the court-appointed receiver, the current board members are seeking to refinance yet again, with a $52 million loan provided by a private lender at a 9 percent interest rate, more than double the current rate, according to court filings.
“They want to get the receiver out, because [the board] don’t want a forensic accountant to come in and uncover all the fraud,” said Stephen Meister, Leifer’s attorney.
Wells Fargo said it does not have a decision making role in the foreclosure because it serves as a trustee. The institution instead directed questions to its special servicer, Rialto Capital Advisors, which also declined to comment.
Leifer — who does not currently hold a seat on the co-op board — filed a motion in federal court this month seeking to block the board from securing the new loan. As the shareholders’ meeting approaches, more than 70 members have signed letters in support of holding board election.
Payments called into question
The allegations against Osman, whose firm Metropolitan Pacific Properties has managed the complex since 1995, range from funneling payments to his family members to misdirecting funds from the board to other companies he manages.
Leifer’s complaint claims that in separate transactions, the co-op board paid a total $220,000 to Osman’s 89-year-old mother. The suit also cites bank records which show that $10,000 was paid to Osman’s sister’s American Express credit card by a board-subsidiary.
Osman told The Real Deal that the former was repayments for a “cash advance” provided by his mother after the board had “trouble paying for the fuel,” while the latter was repayment for purchases made by Acropolis workers for paint and rock salt, who used his sister’s credit card while she was an employee of Metropolitan Pacific.
Outside of the Acropolis, Osman’s firm manages 32 properties in New York and Washington D.C. Among them is a contract with United Nations-owned buildings in East Midtown that house the consulates of 30 countries, including Saudi Arabia, Lebanon and Bahrain. Bank statements filed in the lawsuit also show that $17,500 was transferred from the Acropolis Gardens co-op to “World Council of Peoples for the United Nations,” a non-profit charity. Osman declined to comment on the payments.
“It is self dealing, there’s millions of dollars missing,” said Meister. “The entire board is illegitimate and needs to be replaced so the co-op can get back on its feet.”
As debt rose, so did maintenance fees
This isn’t the first time Acropolis Gardens has faced financial woes. In the late 1980s, after the complex was converted from a rental building into co-ops, Bank of Tokyo moved to foreclose on the property following missed mortgage payments, according to published reports.
Osman claims Leifer’s family, who owned dozens of apartments at the complex dating back to the 1980s, was involved in litigation at the property during that time. He further alleges that this recent lawsuit is an attempt to escape millions in unpaid taxes on the Bank of Tokyo loan. But Meister rebuked this explanation, and said Leifer never consented to any of the recent refinancings.
From 2012 to 2017, the co-op board, Acropolis Gardens Realty Corp., refinanced the property four times — quadrupling its debt to $45 million, property records show.
During the same period, residents faced a 34 percent increase in maintenance payments. In March of this year, it increased another 8.5 percent. Leifer’s suit also alleges that millions of dollars in maintenance fees remain unpaid by multiple defendants in the suit.
Osman, who had no official role on the co-op board, said that he had nothing to do with the multiple refinancings and the debt increase. “I did not direct the board,” he said. “It’s preposterous.”
When asked why he had signed refinancing documents on behalf of the board under the title “assistant treasurer,” according to court filings, Osman said “It must have been a very innocent document that I signed, I’m not a real board member.”
The ongoing saga has attracted attention from local political figures. Last month, New York City Council member Costa Constantinides called for a full investigation of the co-op by the Queens District Attorney.
“Residents deserve to know why they have been brought to this point, how their homes were allowed to deteriorate, and who is at fault,” he said in a statement.
In the meantime, the future of the condo remains unclear as the co-op’s first annual meeting in years approaches.
Incumbent board members who have been named as defendants in the lawsuit are attempting to garner support among shareholders ahead of the election next week. Some have received a petition to surrender voting rights to current board president Debbie Vasquez. She did not return a request for comment.
“You can’t expect the refinancings to stop,” said Solomon, who signed a letter of support for the upcoming board election, “without changing the board that approves them.”