Sharif El-Gamal built a 667-foot condo tower in Tribeca. Now he’s threatening to rip the top of it down, his lender says.
The developer is playing hardball, according to the lender, warning that if a foreclosure proceeds, he will make the project much less valuable.
The seeds of the strategy were sown in 2016 when El-Gamal, the head of Soho Properties, merged two zoning lots at the former so-called “Ground Zero mosque” site, where he planned to build a two-story Islamic cultural center and a 43-story condominium at 45 Park Place.
That allowed El-Gamal to use air rights from the proposed Islamic Museum of New York to build 45 Park Place roughly one-third taller than otherwise permitted, boosting its projected sellout to nearly $448 million.
But the project has suffered a series of setbacks, and its consortium of overseas lenders has cut off funding and is moving to foreclose. To stave off the action, El-Gamal is warning those air rights could disappear, the consortium says.
It’s a complicated maneuver. This February, attorneys for the entity that owns the cultural site wrote to the entity that owns the condo tower, threatening to undo the zoning-lot merger unless the lender releases the funds to complete the project. Both entities are controlled by El-Gamal, according to the lender, although the developer denies that.
The attorneys said the merger rollback would yank 40,000 square feet of rights from the nearly completed condo tower. That would render the most valuable 15 or so floors illegal.
The lending group fired back. In a letter asserting that both entities answer to El-Gamal, it accused him of orchestrating a “bad faith scheme” to “gain leverage in negotiations.”
“To the extent that Mr. El-Gamal and his companies seek to pursue this scheme, they will be held fully liable for any and all damages,” vowed the group, which includes Malaysia’s Malayan Banking Berhad, Kuwait-based Warba Bank and MSD Partners, an investment advisory firm led by the principals of Michael Dell’s family office MSD Capital.
El-Gamal denies having made the threat. He acknowledges having once been the president of the cultural site’s LLC that sent the letter, but said he no longer controls it. A certification in property records shows El-Gamal signed as president of the entity Oct. 16, four months before the letter was sent.
“I did not send that letter. I never threatened to invalidate the [zoning agreement],” he said. “Those assertions that are being made are not supported by the facts.”
The developer added that he stands by the project and intends to complete it.
“I accept the challenge to try to bring everybody back to the table,” he said. “This project means everything to me.”
The threat to deconstruct a condo tower is not new — 200 Amsterdam Avenue is facing the loss of its top 20 floors after a judge sided with opponents earlier this year — but for one to come from the building’s own developer might be unprecedented.
Slow sales
As with many luxury condo projects across the city that missed the market’s peak in 2015, El-Gamal’s troubles at 45 Park Place have been building for some time.
Records show only 11 of the tower’s 50 units have gone into contract since sales launched in 2017, the most expensive being a three-bedroom on the 38th floor asking $12.35 million. The elaborate website for 45 Park Place boasts of its full-floor residences and high-profile team, including El-Gamal, interior designer Piero Lissoni and architects Michel Abboud and Jean Nouvel (who only designed the proposed museum, not the residential building). But finding buyers could be further complicated by the pandemic.
Stribling & Associates initially handled sales and marketing at the building, before parting ways with the developer in 2017. Corcoran Sunshine Group has taken over, but the “availability” section on the project’s website has no active listings. A representative for Corcoran Sunshine declined to say why.
Progress on the cultural center has also been slow since plans were filed for it in 2017. Zoning approval remains pending, according to the Department of Buildings, and a spokesperson for the agency said it has not received any communication about that.
With so many condo projects in distress and buyers coping with coronavirus fallout, 45 Park Place will not be the only one to face a reckoning. More foreclosures, note sales and projects changing hands are expected, said Stephen Kliegerman, president of Halstead Development Marketing.
“Unfortunately, out of any economic crisis there are foreclosures and there is distress in the construction and new-development marketplace,” he said. “I do think there will be some projects — particularly those that have been troubled pre-Covid — that are certainly looking at more difficult times ahead.”
Read more
Commercial
New York
Judge green-lights mezzanine foreclosure of Hidrock’s Midtown hotel project
Development
New York
“We’re exploring everything”: Ceruzzi’s UES condo under pressure after loan falls through
Popular
New York
By the Book: Behind El-Gamal’s deal for sharia-compliant financing at 45 Park Place
El-Gamal’s lender filed to foreclose on the property in early March, before the state shutdown. The group offered up a laundry list of violations that it claims put the loan into default, including El-Gamal’s failure to repay the outstanding balance of about $108 million when the loan matured in last April. Another allegation is that he fell short of a sales milestone in November 2018, when he was supposed to have signed contracts totaling 120 percent of the price of the construction loan.
The lender also argued that El-Gamal received an unauthorized $62 million mezzanine loan on the property in the spring of 2016, lacks the required $10 million liquidity to keep the loan in balance and has been responsible for construction delays and mechanic’s liens filed against the site.
In March, Justice Francis A. Kahn III appointed a temporary receiver to take control of the property, a move that attorneys for the developer tried to block.
“All parties must agree that the prospect of a languishing, half-completed skyscraper in lower Manhattan for years to come is a scenario that should be avoided at all costs,” a lawyer for one of the El-Gamal–affiliated entities wrote in a letter to the judge on March 20.
Matthew Parrott of law firm Fried Frank, who is representing the lender, declined to comment.
The project has had its share of other problems. Last year, El-Gamal had a showdown with his contractor, Gilbane Building Company, over a delayed $10 million payment.
He had also been working to secure a loan of between $170 million and $190 million from Madison Realty Capital, a deal that sources said fell through. A representative from Madison Realty Capital declined to comment.
El-Gamal may yet get 45 Park Place out of its predicament. He said his firm had received a refinancing commitment from Meritz Financial Group in December for about $200 million. He said he intends to finalize the deal, but could not provide a timeframe.
Contact Rich Bockmann at rb@therealdeal.com or 908-415-5229, and Sylvia Varnham O’Regan at so@therealdeal.com