Yitzchak Tessler Loses Remaining Units At 172 Madison Avenue

The end has arrived for Yitzchak Tessler at 172 Madison Avenue.

A federal court judge on Tuesday confirmed a reorganization plan of the developer’s entity that controls the nearly decade-old condo project that will result in Tessler turning over the 10 remaining unsold residential and two commercial units at the 72-unit building to distressed debt investor ArcPe.

Tessler had entered the entity into bankruptcy one year ago to stave off ArcPe’s foreclosure efforts. ArcPe had bought the construction loan on the building from Deutsche Bank for roughly $60 million in Jan. 2024.

It wasn’t supposed to go down like this.

ArcPe and Tessler agreed upon a reorganization plan in June, in which ArcPe agreed to reduce its debt claim to $45.5 million from the original $65 million it was seeking and Tessler agreed to turn over the building’s seven units while keeping the unfinished penthouse units for himself to sell.

Tessler was planning to obtain $35 million in exit financing, which would go towards finishing the penthouse units and paying down the remaining debt. He would also be contributing $3 million personally to pay down administrative expenses and fees.

But days before a hearing set at the end of July to confirm that plan, Tessler informed ArcPe that he would not have the funding required to move ahead with the plan as constituted.

Ever the deal-maker, Tessler tried for one last-ditch attempt to hold on to the penthouse units, submitting a status update at around 8 p.m. the night before the confirmation hearing.

In it, Tessler claimed to have found a co-developer willing to act as a guarantor for a $24.5 million refinancing of the five penthouse units, which would still leave him several million short of the money needed to confirm the reorganization plan.

The co-developer, Los Angeles-based Wylan/James, would receive 100 percent of the proceeds from the sale of the penthouse up to $10 million, and split the remaining sales 50/50, according to the term sheet submitted to the court. Assuming the finished penthouses had a value of $45 million as Tessler posited, he would receive $17.5 million for the penthouses, a far cry from the $98 million he once sought.

After a delayed start to the hearing, in which Tessler’s lawyer Kevin Nash couldn’t access the Zoom, Nash made a plea to ArcPe and its lawyer, Offit Kurman’s Jason Nagi, to consider extending the refinancing deadline and give Tessler time to finish his refinancing efforts, which would still require due diligence and appraisal.

“There’s an opportunity here that Mr. Tessler has isolated with new money and a fresh developer to finish off the construction on these unfinished units,” Nash said in court.

Nagi and ArcPe were ultimately unmoved.

“Mr. Tesler has burned up all of the goodwill he possibly could have had,” said Nagi, pointing to a number of false starts on Tessler’s part in terms of obtaining financing.

“It’s time to move on,” he concluded.

The marketing for the unfinished penthouse units and the seven finished units will be handled by a Serhant team, including Jordan Hurt and Jessica Taylor. ArcPe’s David Gordon said he expects sales to begin after Labor Day.