Le Penthouse goes into Le Bankruptcy

Yitzchak Tessler shields 172 Madison from foreclosure at 11th hour

Bankruptcy for Le Penthouse, Manhattan’s Once-Priciest Condo
Madison 33 Partners' Yitzchak Tessler and ArcPe’s David Gordon with 172 Madison Avenue (NCM-USA, ArcPe, Google Maps, Getty)

The owner of “Le Penthouse,” once the most expensive apartment listed in New York City, put it into bankruptcy this week.

Yitzchak Tessler made the last-minute move to avoid foreclosure after failing to sell the unit and several others in his ambitious condominium project at 172 Madison Avenue.

Tessler’s filing Tuesday came five minutes before a scheduled foreclosure sale by real estate investor ArcPe. ArcPe had purchased the debt on the units earlier this year from Deutsche Bank, which had refinanced them for nearly $100 million six years ago.

Bankruptcy filings are common to stop foreclosure sales, but Tessler’s action irked Miami-based ArcPe.

“We believe it was in bad faith,” ArcPe’s David Gordon said.

Tessler, one of the owners of Madison 33 Partners, the LLC that owns the units, was not available for comment, but Jonathan Pasternak, an attorney who represents the entity, called Gordon’s charge “preposterous.”

Pasternak said Tessler hopes to sell the units and is looking to maximize the return on sale. The developer estimates the value of the unsold apartments and commercial spaces to be $100 million.

“These are good, valuable units, and we’re not just going to let them go in a fire sale,” the lawyer said.

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It is clear, however, that Tessler greatly overestimated the market for luxury Midtown condos. The units at 172 Madison had Billionaire’s Row pricing but, at the corner of East 33rd Street, are not in a comparable residential area.

Le Penthouse made headlines in 2019 with its $98 million price tag. It was initially planned to be a five-story unit with 11 bedrooms, 14 bathrooms, a pool and jacuzzi. Tessler dropped the price to $76 million in 2020, but no one bit.

Now, Le Penthouse is being broken into five penthouse units to be sold individually. They are not yet finished, according to Pasternak. Five completed residential units and two ground-floor commercial units are also unsold.

The project at 172 Madison began in 2015, around the peak of a luxury condo boom in Manhattan, and sales launched that year. But the boom turned into a glut as the decade wound down, and selling overpriced, unfinished units in Midtown became increasingly difficult.

In 2017, with about 60 percent of units sold, Tessler took out a $164.3 million condo inventory loan from TPG and Deutsche Bank. He refinanced the unsold units with $94.5 million from Deutsche Bank in 2018. ArcPe bought that debt from Deutsche Bank this January.

Initially, sales were led by Keller Williams NYC, where Tessler’s son Efraim worked. Compass took over in 2017 but resigned from the project the following year. At the time, sources told The Real Deal that the Compass brokers disagreed with the developer’s pricing, and that Tessler likely did not want to discount them as the market slowed.

In 2018, Concoran took over most of the open listings, with 32 units unsold out of 72. Two years later, just before the pandemic, Tessler slashed his asking prices.

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From left: Keller Williams NYC’s Efraim Tessler and Raphael Sitruk, Yitzchak Tessler and 172 Madison Avenue (Credit: 172 Avenue, NCM USA)
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