Are developers playing "chicken" with the market?

David Goldsmith

All Powerful Moderator
Staff member
Another loss at chicken:
Sold for $20,207,500 - originally asking $50 million.
Fortress Investment chairman buys steeply discounted Zaha Hadid penthouse
Deal closed for $20M West Chelsea condo, which is $30M less than original asking price

Related Companies’ sale of a penthouse at its Zaha Hadid-designed condominium in West Chelsea may become the poster child for Manhattan’s strong buyers’ market.
The developer first listed the top-floor unit at 520 West 28th Street in 2016 for $50 million, or $7,296 per square foot. Four years later, amid a global pandemic, the 6,853-square-foot condo has sold for $20.2 million, 60 percent less than Related was initially seeking, public records show.

The buyer, Wesley Edens, chairman of private equity firm Fortress Investment Group, paid $2,947 per square foot and closed on the unit in 10 days. He purchased the unit through a Delaware limited liability company, Rock Springs Arete, but he signed the deed using his own name.

The five-bedroom apartment overlooks the High Line and spans three levels with a 2,550 square feet of outdoor space, including a landscaped roof deck, according to the unit’s listing.

The condo was on and off the market over the past four years, with prices falling each time it reappeared. It was last asking $24.9 million. Corcoran Sunshine Marketing Group and Related are handling marketing and sales at the 39-residence building, and Peter Zaitzeff was the unit’s listing agent.
Edens is one of three founders of the New York-based Fortress, which was acquired by SoftBank Group for $3.3 billion in 2017. He is also a co-owner of the Milwaukee Bucks basketball team.
Related, Corcoran Sunshine and Peter Zaitzeff declined to comment. Fortress did not respond to request for comment.

Despite the steep discount, the deal wasn’t a wash for Related, though some could argue it’s a race to the bottom. The sale is the largest residential deal to close in the West Chelsea submarket in two years, according to The Real Deal’s analysis of data from OLR. It surpasses the previous record holder, a heavily-discounted penthouse at Walker Tower, which sold for $18.25 million in August.
The building’s other two penthouses have yet to trade, but one appeared on the market in January asking $13.95 million.
Other West Chelsea properties have absorbed major price reductions of late, including the Getty condominium and the Andres Escobar-designed townhouse at 357 West 17th Street.
 

David Goldsmith

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Staff member
No repeat of last week's levels, but still huge improvement from July doldrums.
This week's New Development Report from Sotheby's Kevin Brown Team.
 

Attachments

David Goldsmith

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Staff member
Wonder Works’ UES condo being shopped at foreclosure sale
JLL has scheduled a December auction for the project’s mezzanine loan

An Upper East Side condo developed by Wonder Works Construction is facing UCC foreclosure, the latest in a spate of recent actions taken against struggling condo developers.
A team of JLL brokers, including Brett Rosenberg and Jeffrey Julien, has been retained by mezzanine lender Nahla Capital to shop the loan for the Vitre condo at 302 East 96th Street, according to marketing materials reviewed by The Real Deal.
It was not immediately clear how much Nahla’s mezzanine loan was being offered for in the UCC foreclosure auction — subordinate debt is not recorded with the city. However, the tower secured $68 million in refinancing last year, which included a $43 million loan from Deutsche Bank.

Wonder Works, Nahla and JLL did not respond to requests for comment. Compass broker Alyssa Soto Brody, who is handling sales at the building and is married to Wonder Works principal Eric Brody, also did not respond.
The Vitre condo launched sales in 2017 and nine of its 48 units were in contract by July 2018, according to an amendment to the offering plan. But sales appear to have plateaued since, and the latest filing shows that 40 units remain unsold, indicating one buyer backed out.
Before the pandemic, developers had pitched investors on bulk-buy opportunities at the 21-story project, according to two sources familiar with the matter. No such deals ever moved forward.

The offering is the latest in a series of distressed opportunities to come up in New York, as the pandemic tips struggling projects further into the red. Newmark Knight Frank is currently shopping the mezzanine positions on four of HFZ Capital’s New York condos. The construction loan tied to 161 Maiden Lane — the “leaning” Seaport condo — is also up for sale.
Lenders can use the Uniform Commercial Code, or UCC, to foreclose on collateral — usually an ownership interest in a property — without having to go through a lengthy court process.
However the code’s requirement that the foreclosure be “commercially reasonable” complicated matters during the pandemic, as borrowers queried the reasonableness of foreclosing when the economy is in such a state of disrepair. A New York Supreme Court decision in August held that a UCC foreclosure in that case could not go ahead until Oct. 15.

The Vitre’s UCC auction is scheduled for Dec. 8.
 

David Goldsmith

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Staff member
Odd summer for Manhattan’s condo market
Deal volume down, prices up as 220 CPS carries the quarter

The Manhattan condo market this summer was like deep-sea fishing: Not many deals rolled in, but they tended to be big.
A total of 511 condo deals closed from July through September in the borough, down from 614 in the second quarter, according to an analysis by The Real Deal. The average sale price, meanwhile, rose to $3.6 million from $2.7 million per deal in the second quarter and $2.4 million a year ago.
The larger deals pushed total sales volume up to $1.85 billion — a 13 percent increase from the prior quarter’s $1.63 billion.

One building in particular played an outsize role in this shift: Vornado Realty Trust’s 220 Central Park South. It single-handedly accounted for almost a third of the quarter’s sales volume, with 16 units closing for a total of $592 million — an average price of $37 million.

The table below shows how different Manhattan submarkets fared in the third quarter, compared with the same period a year ago. It is hard to miss the impact of 220 CPS on Midtown sale volume and pricing.

A few other buildings also saw a slew of closings in the quarter. L+M Development and J&R Music World’s 25 Park Row saw a whopping 29 closings for $67 million — increasing the Seaport submarket’s sales volume by more than 700 percent quarter-over-quarter and sixfold year-over-year.
Out west, Related Companies saw five closings at 15 Hudson Yards and three more at 35 Hudson Yards for a total of $50 million — a 623-percent increase from the submarket’s prior quarter, but still 74 percent less than the $192 million Hudson Yards saw in the third quarter of 2019.
Another busy building was 30 Riverside Boulevard in GID Development’s Waterline Square complex on the Upper West Side, which had 19 closings totalling $59 million.

On a per-square-foot basis, pricing in Manhattan’s condo market rose by nearly a quarter from the previous quarter as well as year-over-year. The big sales at 220 CPS played a role here as well, but it was far from the only driver.
As the chart below shows, submarkets including the Seaport, Midtown West, Chinatown, the Financial District and Chelsea also saw major increases in price per square foot in the third quarter.
 

David Goldsmith

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Staff member
Starwood suing HFZ for $157M over co-op conversion loan default
HFZ also failed to abide by forbearance agreement for debt payment on the century-old UWS building, according to federal suit

Starwood Property Trust is suing Ziel Feldman’s HFZ Capital Group, charging the developer defaulted on loan payments at an Upper West Side co-op conversion and failed to abide by a forbearance agreement.
Starwood— through SPT Chatsworth Holdings — is seeking $157 million, according to the federal suit it filed Tuesday in New York. The company alleges that HFZ, Feldman and his wife, Helene are in default on the senior and mezzanine loans, an unsecured loan and an inventory loan obligation for the Chatsworth, a century-old building at 344 West 72nd Street. The inventory loan was supposed to be used to buy shares in the co-op.

In a statement on Friday, Starwood said it is “in active discussions and the matter may be resolved in a matter of days.”
The balance of the unpaid loans were due in January, according to the suit. Under its contract with Starwood, HFZ was required to purchase the unsold units in the co-op within 45-days of a default, which it failed to do, according to the complaint.
The suit follows an August forbearance agreement between HFZ and Starwood. According to that deal, HFZ agreed to make installment payments totaling $9.1 million between Aug. 17 and Oct. 28. Starwood alleges HFZ missed those scheduled payments on the forbearance agreement.

Starwood alleges that Nir Meir, a managing principal at HFZ, told the company he sent two separate wire transfers to fund past-due payments. But Starwood said it never received the money. On Sept. 4, Starwood legal counsel told HFZ it was in default of the forbearance agreement, according to the complaint.
An HFZ spokesperson called the Starwood allegation “inaccurate.” The spokesperson added that “wire transfers were sent and received by Starwood and Starwood applied those funds in accordance with the loan docs, including payment of interest and legal fees.”

The company declined to comment further on the lawsuit.
HFZ bought the Chatsworth in 2013 for $150 million and quickly sought to convert the 147-unit Beaux-Arts rental building into co-ops.
Some of the units at the building were rent-stabilized, and HFZ tried to buy out those renters. In 2017, HFZ sold 46 of the building’s rental units for $38 million to an entity linked to the Safras, a Brazilian banking and real estate family from Brazil.
Over the years, HFZ has purchased a number of historic Upper West rental buildings and converted them into co-ops or condos. But the company has run into trouble with its loans on a few of these buildings.

Last month, CIM Group tapped a brokerage to market junior mezzanine loans tied to four of HFZ’s New York condominium projects through a foreclosure sale.
HFZ’s other major projects include the XI, a mixed-use condo and hotel project near the High Line, and the Belnord, a storied Upper West Side rental building that the developer converted into a 95-unit condo project.
 

John Walkup

Talking Manhattan on UrbanDigs.com
Gotta think those who are plugged into the new dev scene can grab some Krazy discounts soon, if not already.
 

David Goldsmith

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Staff member
"A representative for the developer did not respond to questions from TRD about contract volume to date — developers are not required to report such figures publicly — but Extell said in a statement that closings are expected to begin by the end of the year."

Anyone know how many sold in the last 2 years vs how many they need to sell in the next 2 months?


Extell brings on Corcoran Sunshine to help market Central Park Tower
Financing deal requires $500M worth of units to be in contract by December

When it launched sales in 2018, Extell Development’s Central Park Tower was the most expensive condominium project in the city’s history.
Two years later, the developer has announced a shake up of its sales team in the midst of a pandemic that has battered the city’s luxury condo market.
In a statement Wednesday, Extell said Corcoran Sunshine Marketing Group would join the developer’s in-house sales team as co-exclusive brokers at the skyscraper at 217 West 57th Street.
“We have a long-standing and successful relationship with Corcoran,” Extell chairman Gary Barnett said in a statement, adding that together they would take a “fresh look” at how to market the under-construction tower.
“Now that it is nearly complete, we will have new model residences, new listings, and exceptional pricing for today’s market,” Barnett said.
Extell closed on $1.14 billion in financing for the tower in December 2017. Under the deal, the developer is required to have $500 million worth of units in contract by this December, according to filings with the Tel Aviv Stock Exchange.
A representative for the developer did not respond to questions from TRD about contract volume to date — developers are not required to report such figures publicly — but Extell said in a statement that closings are expected to begin by the end of the year.
The 1,550-foot-tall building topped out last fall and has a projected sellout of $4 billion. Units range in size from two bedrooms to eight bedrooms, Extell said. Active listings include a full-floor unit asking $65.5 million and a three-bedroom priced at $8.5 million.
The base of the building is used as retail space by Nordstrom, which opened site last year. Records filed on the Department of Buildings’ website show that a temporary certificate of occupancy has been issued for the retail space, but not for the residential units.
 

David Goldsmith

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Staff member
Aby Rosen accuses Chinese partner of “power grab” after condo loan default
China Vanke acquired interest in $360M loan in backdoor deal, lawsuit alleges

First came the condo market slowdown. Then came the pandemic. And now, Aby Rosen’s luxury development at 100 East 53rd Street is in crisis because of an improper “backdoor deal.”
The partner, Vanke US, “orchestrated an irreconcilable and grossly improper conflict of interest” that put it “on both sides of the borrower-lender relationship without RFR’s consent,” Rosen’s firm alleges in a lawsuit filed last Friday in New York County Supreme Court, Crain’s reported.

Vanke now has a $115 million interest in a defaulted $360 million loan on the project, which the Industrial and Commercial Bank of China originally provided in 2015. The Chinese developer now has the right to foreclose or make other decisions about the fate of the property while also having insider access to RFR’s plans — making it “a mole for the lenders,” the lawsuit claims.

Dan Perry of Milbank, the law firm representing Vanke US in the suit, said in a statement that his client believes “the lawsuit is without merit.”
“Vanke believes the facts will show that it has consistently taken action to protect the value of the project, whereas RFR has elected to put its own interests ahead of the partnership’s interests,” the statement continues. “Purchasing a subordinate position in the debt was an option of last resort that it believed was necessary to protect its significant equity interest in the project, eliminate the risk of a near-term foreclosure and stabilize the partnership.”

Perry added that Vanke had given RFR the opportunity to purchase a proportionate interest in the debt as well.

RFR had selected Vanke to partner with it on the 63-story, 94-unit development in 2014, “in large part” due to the company’s “sales and marketing channels overseas” which would help attract buyers from China, the lawsuit states.

The group’s high hopes for tapping the Chinese market did not pan out, as capital controls soon put a damper on demand for luxury properties. The loan went into default upon maturity this May.
A few months before the default, according to the suit, Vanke offered to buy 25 of the least expensive condo units for about $75 million, to help pay down the loan and make it possible to get an extension. RFR rejected this as a “self-serving” move that made “no economic sense,” as it would be “saddled with only the most expensive and hardest-to-sell units” in the midst of the pandemic.

RFR notes in the suit that as China’s largest bank and one of its largest residential property developers, respectively, ICBC and Vanke had a longstanding relationship that enabled them to execute this “power grab” — in violation of contractual terms that gave RFR the exclusive right to deal with the lender.
According to prior reports, RFR’s other partners on the development include Hines and China Cinda Asset Management. Those partners are not mentioned in the present lawsuit, and their involvement is unclear.
 

David Goldsmith

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Staff member
For struggling condos, the pandemic proves the ultimate test
Developers struggle to salvage shaken projects as industry anticipates deeper distress

A partially built condominium in Manhattan’s Financial District cuts a melancholy figure on an overcast Saturday in August. The front of the building, an exposed checkerboard of unfinished apartments, stretches 912 feet upward into a fog of gray cloud. Two security guards mill about on the deserted pavement opposite.
Construction at 125 Greenwich Street has been stalled for months, and the developers, a group that includes Davide Bizzi’s Bizzi & Partners and Howard Lorber’s New Valley, are on a mission to see it over the finish line.
That may be tricky: The project is deep in debt, and two foreclosure actions filed before the pandemic hang over it. Sales were expected to begin closing by June 30. When that didn’t happen, Michael Feldman of Romer Debbas said, four of his clients who had bought units in the building took the developers up on an offer to rescind their contracts.
The luxury development, with 273 units priced between $1 million and $6 million, is one of many in Manhattan that launched sales after the heady days of the condo boom passed, adding to a glut of high-end properties across the city.
Though Manhattan’s depleted luxury market is beginning to flicker with small bursts of activity, it may not be enough to save some projects from becoming distressed investment opportunities. That’s especially true for projects that struggled before the economic crisis.
"The pandemic really heightened awareness, because lenders started looking at things a little bit more closely,” said Stephen Kliegerman, president of Brown Harris Stevens Development Marketing. “Projects that were already thin or even underwater, pre-Covid, all of a sudden the fire alarm went off and people started to really worry. If they weren’t doing well pre-Covid, how are they going to do coming out of Covid?”
Deals on ice
When the pandemic froze Manhattan’s luxury market in March, it did not discriminate. Deals for properties priced above $4 million fell across the borough to an average of just four per week, according to Donna Olshan of Olshan Realty, who tracks luxury sales.
After the state allowed brokers to start showing homes again in June, luxury deals picked up to an average of 11 per week — still far from a total recovery and well below the average of 18 in 2019. The total number of luxury contracts signed in Manhattan between January and the first week of October fell 40 percent from the same period last year.
The climate has forced embattled developers to consider their options, which include securing more financing, selling units to bulk buyers and bringing in new partners. But with so much uncertainty, lenders have further retreated from high-end condos, driving up borrowing costs.
The problems at 125 Greenwich predated the pandemic. Last summer, the developers defaulted on loan payments and construction bills, triggering a foreclosure action from United Overseas Bank, which subsequently sold the debt to investment firm BH3.
After the developers defaulted, Nicholas Mastroianni, whose EB-5 fund had $194 million in the project, enlisted brokers from Newmark Knight Frank to market the debt in a UCC foreclosure auction, but one never materialized. Mastroianni declined to comment on why.

In February, Fortress Investment Group purchased the tower’s defaulted mortgage from BH3 for about $230 million, inheriting the foreclosure action. A person familiar with the development said they anticipate Fortress will “continue on with the foreclosure and potentially work out a deal with the sponsors as well.” Fortress declined to comment.
Patrick Fitzmaurice, a partner at law firm Pillsbury Winthrop Shaw Pittman who represents lenders and creditors but is not involved at 125 Greenwich, said it’s not unusual for a development to have a UCC foreclosure and a foreclosure lawsuit levied against it at the same time; different lenders have different priorities and timelines.
Fitzmaurice said lenders in Fortress’ position can “continue negotiating with the borrower and any other interested party” until the end of the foreclosure process, and there’s “always the possibility of a deal.”
But new financing for the development remains elusive. Talks with Silverstein Capital Partners last year about a possible capital infusion or recapitalization collapsed because the parties could not reach an agreement on terms, according to a person familiar with the matter.
Ran Eliasaf, managing partner of Northwind Group, which recently launched a debt fund that offers condo inventory loans and rescue deals, said the firm received a package of materials about financing 125 Greenwich that was circulating last year, but decided against it because “it doesn’t meet our fund’s criteria.”
“We always felt that the luxury market was saturated and there’s not enough buyers out there for so much supply,” Eliasaf said.
Bizzi and New Valley declined to comment, but a recent amendment to 125 Greenwich’s offering plan says the sponsors are still “in active negotiations” for new financing.
Going once, going twice
The tower at 125 Greenwich is far from alone in its woes.
For several months, Ceruzzi Properties has been looking to refinance, sell or do bulk deals at its Hayworth condominium at 1289 Lexington Avenue, which has struggled to move units. In September, Newmark Knight Frank started shopping the junior mezzanine positions of four HFZ Capital condos. And in October, JLL began marketing a UCC foreclosure sale on Wonder Works Construction’s Vitre condo at 302 East 96th Street, where 40 of 48 units remain unsold after two years on the market.
“For the first few months of the pandemic and after things shut down, what you saw was lenders really working with borrowers and either deferring interest, deferring principal, [or] deferring principal and interest,” said Michael Lefkowitz of law firm Rosenberg & Estis, who represents real estate clients in both the equity and the debt spaces. Now, he said, “I think you’re seeing less cooperation in that regard.”
“[Lenders] understand there’s a bigger problem here,” Eliasaf said. “It’s not like the developers did something wrong, necessarily, and it’s not like the banks will get the keys and do a better job selling.”
Still, there are limits. “You can’t work around a basis issue,” he said, referring to the costs developers and lenders put into projects. “If your basis is $2,600 a foot and you’ll sell units at $2,000 a foot, your equity is wiped.”
Fitzmaurice said that while he has been hearing a lot of talk from lenders about pursuing foreclosures, he hasn’t seen much action so far.
“I think there’s a few different reasons for that,” he said. “Some of it is the nature of the pandemic and the uncertainty that exists with when values are going to stabilize, and where they’re going to stabilize, and how long it’s going to take.”
There are also logistical considerations: Since the pandemic hit, New York state has put restrictions on initiating foreclosures and there have been several complaints filed by debtors facing UCC foreclosure auctions. In one such case, a New York judge delayed an auction from going forward because it would not be “commercially reasonable” to do so.
Fitzmaurice predicts the market will probably see more foreclosures in the next six months or so.
“There are defaults all over the place,” he said. “Eventually, there just has to be [foreclosure] activity when you have those circumstances. Particularly where nobody knows when it’s going to be better.”
Still, whether because of pragmatism or bravado, some in the industry insist the crisis has separated the wheat from the chaff: If investors are looking for distressed opportunities, they won’t find those in premium buildings with stable finances, but in developments with too much debt, unrealistic pricing or crummy designs.
“As a developer and as a native New Yorker, it’s tough to see the challenges in the market before coronavirus and now after coronavirus, but in some ways it’s one of those things where the cream rises to the top,” said Evan Stein, president of development firm J.D. Carlisle, which is currently building a 199-unit condo, Madison House, at 15 East 30th Street in NoMad.
To Kliegerman, the situation feels a lot like 2008, when the financial crisis left many developers similarly exposed. “Everyone realized that the emperor didn’t have clothes on in many of these projects,” he said.
Both Lefkowitz and Fitzmaurice anticipate there could be deeper distress this time around, in part because there are more unsold apartments on the market.
Though luxury inventory right now looks similar to what was on the market during the financial crisis — 1,600 listings in the third quarter this year versus 1,623 in the third quarter of 2008 — there is much more high-end “shadow inventory” today. Appraiser Jonathan Miller of Miller Samuel predicts the current crop of unsold new-development units across Manhattan will take 8.7 years to sell, compared to 3.5 years in 2008.
Northwind’s Eliasaf argues that the outlook this time around is more optimistic. During the pandemic, the stock market has performed well, he said, and investors have cash to spend.
“I think it’s going to be very specific,” he said. “You’ll have specific buildings, specific properties, specific owners that will have serious issues, and you’ll have others whose portfolios are more well-balanced that will be okay.”
The New York puzzle
While many of the condo market’s pain points manifested before the pandemic, what happens going forward will depend on New York City’s broader recovery.
Schools have largely reopened, and some of the wealthy residents who retreated to the suburbs have returned. But unemployment remains twice as high as in the rest of the country, and the vast majority of office workers are still working from home.
“It’s all part of the same puzzle,” said Lefkowitz. “If we were to have a second wave and we have a slower return to the office, a slower return to normal activity, this will likely result in increased activity on foreclosure.”
In the once-bustling Financial District, 125 Greenwich Street remains in limbo. The building, which topped out last March, was just 68 percent complete as of December, according to a financing prospectus obtained by The Real Deal. No listings are currently on the market.
“I think it was always an ambitious project, both construction-wise and pricing-wise, for that neighborhood,” said Eliasaf.
The condo is now expected to begin its first year of operation in January, according to the latest amendment to its offering plan. Whether that happens, however, is as uncertain as everything else.
In the meantime, there are plenty of investors, both private and institutional, looking for opportunity. The appeal of a distressed condo note is the value investors believe they’re getting, according to Lefkowitz.
But what is value in such a prolonged crisis, with normal life upended and the real estate market likely scrambled for years to come?
“That’s the big question,” he said.
 

David Goldsmith

All Powerful Moderator
Staff member
Another loser at the Chicken Game.
Under water: Shipping magnate’s troubled UES condo is bankrupt
Spiros and Antonia Milonas’ condo has three unsold units and years of problems

After a yearlong deadlock that saw its property on the verge of financial ruin, the sponsor of a six-unit condo at 40 East 72nd Street is officially bankrupt.
Axia Realty LLC filed for Chapter 11 bankruptcy protection on Monday, with 50 percent equity owner Antonia Milonas acting as sole manager. The owner of the other 50 percent, Antonia’s husband Spiros Milonas, was “judicially declared unable to manage his own affairs” in August under the Mental Hygiene Law, according to court filings.
Antonia’s ability to manage the LLC’s finances is still constrained, however, due to a long-running family feud involving Spiros’ $500 million shipping, oil, gas and real estate empire.
“I am not in possession or control of [Axia’s] books and records as my husband’s daughters from a prior marriage have wrongfully hijacked [its] operations, have withheld financial information regarding [its] operations from me and have been systematically manipulating [Axia] for their own benefit,” she wrote in an affidavit.

Axia still owns three of the project’s unsold residential units and an office unit, which had a total estimated value of $45 million prior to the pandemic. Antonia and Spiros themselves reside in the building’s penthouse unit, which is valued at $23 million, according to court filings.
Through the Chapter 11 process, Antonia Milonas intends to recover over $4 million that she claims Spiros’ daughters improperly funneled to the family’s shipping business, Ionian Management, and to overturn a 2018 judgment according to which Axia owes an Ionian affiliate $2.2 million in connection with the development of the condo project.

The buyers of the building’s three other units sued Axia last year, seeking to take control of the condo board and fend off “complete chaos” in its operations. The unit owners’ demand was granted in part, but with the caveat that decisions related to financing still required a supermajority.

That still wasn’t enough to turn things around: Last October, the building manager informed the unit owners in an email that the condo was “officially out of money.” Some building staff had already walked off, while the ones who stayed had been taking their meals on a chair in a rat-infested basement, according to condo board meeting transcripts.
Representatives for Axia, the condo unit owners and the condo board did not respond to requests for comment.
In addition to the millions of dollars in dispute with Ionian Management, Axia owes about $400,000 in common charges and $500,000 in real estate taxes, according to court filings. A teleconference with creditors has been scheduled for Dec. 3.
 

David Goldsmith

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HFZ sued over delinquent loans at Upper East Side project
Principals Ziel Feldman and Nir Meir named as defendants for personally guaranteeing debt

HFZ Capital Group continues to have trouble meeting its debt obligations.
The lender at HFZ’s planned project on Manhattan’s Upper East Side claims the prolific condo developer owes more than $18 million on defaulted loans, according to a motion for summary judgement filed in New York Supreme Court on Tuesday. HFZ principals Ziel Feldman and Nir Meir are named as co-defendants for personally guaranteeing the debt.
The lender, identified as YH Lex Estates, claims it loaned HFZ a total of $20.5 million between 2017 and 2019 to develop the project on an assemblage around 1135 Lexington Avenue. The lawsuit alleges that after HFZ defaulted on the initial loan agreement in November 2019, it agreed to a repayment plan. In July, the two parties again agreed to extend the repayments, allowing the developer to repay the loans in six installments by October.

But HFZ only paid $1 million towards the balance of these loans, the suit alleges. At one point, the lender claims a $750,000 check that Meir sent from HFZ was returned for insufficient funds.
In addition to seeking the principal and interest of the loans, the lender said that “because of the history of HFZ’s noncompliance with its debt obligations, HFZ explicitly agreed to pay all legal fees and costs incurred.”

A spokesperson for HFZ Capital said in a statement the claim is baseless and is in the process of being dismissed.
The attorney representing YH Lex Estates, Mark H. Hatch-Miller of Susman Godfrey, did not return a request for comment. PincusCo first reported the news.
HFZ has become one of the most active condo developers in New York City in recent years, with high-profile projects like the XI, the Bjarke Ingels-designed condo-hotel hybrid next to the High Line, and the Bryant, the David Chipperfield-designed condo near Bryant Park. It also bet on rental conversions, including the Belnord on the Upper West Side, which it transformed into condos.

But recently the company has seen its share of problems. In December, federal officials alleged that HFZ managing director John Simonlacaj let the mob skim hundreds of thousands of dollars from the XI, as well as other Manhattan projects. (He was fired from HFZ.) And in September, CIM Group tapped a brokerage to market junior mezzanine loans tied to four of the developer’s condominium projects — including 88-90 Lexington Avenue and The Astor at 235 West 75th Street — through a foreclosure sale.
Last month, Starwood Property Trust filed suit against HFZ alleging the firm defaulted on loan payments at the Chatsworth, an Upper West Side co-op conversion.
 

David Goldsmith

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Staff member
Contractor accuses Alchemy Properties of trying to damage reputation
Lawsuit claims Woolworth condo developer failed to pay, then retaliated for mechanic’s lien

A contractor who worked on converting office space to luxury condos at the Woolworth Building has accused the developer of failing to pay its bills and threatening to damage the contractor’s reputation, Crain’s reported.
Alchemy Properties bought the top 30 floors of the building at 233 Broadway from Witkoff Group and Cammeby’s International in 2012, and made plans to convert the space into 32 high-end units.

Alchemy hired CNY Construction in 2016 to carry out the work, according to Crain’s.
In a lawsuit filed Tuesday in Manhattan’s state Supreme Court, the contractor claimed the developer failed to pay a bill of more than $1 million, which prompted CNY to file a mechanic’s lien late last year.
The developer then allegedly threatened to contact CNY’s other clients and speak disparagingly about its work if CNY did not abandon the lien, Crain’s reports.

The suit claims the developer did in fact call a prospective client of CNY, which cost them business.
Alchemy did not respond to Crain’s requests for comment.
 

David Goldsmith

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How Do You Chop 20 Stories Off a Too-Tall Building?

Now that the 52-story tower at 200 Amsterdam Avenue is almost done, it may soon have to be partly undone, like a construction film running in reverse. If the appeals court that will hear the case starting Wednesday upholds a judge’s ruling that the building is illegally tall, the crews now putting on the final touches will have to start unraveling the top 20 or so floors, breaking freshly installed glass, slicing through new steel beams, and grinding down recently poured concrete. If the never-used bathroom fixtures can’t be salvaged, they may have to be smashed, at considerable risk to the workers. “You break them, and they’re like razor blades,” says Mel Ruffini, an executive at Tishman Construction. “Glass, you expect to get cut from. Toilet bowls, not so much.” All that wastage has to be expelled and carted away. If the whole shebang were coming down, workers could run a rubble chute through the shaft to the basement, but here there will be actual working elevators in the way, so the chutes will have to be fastened to the still unscuffed exterior.
The building sits on a bizarre knot of different parcels, and figuring out which rules apply has been an oracular exercise even by the standards of New York’s inscrutable zoning code. Complexity favors developers equipped with expensive legal advice, which is how SJP Properties persuaded the Department of Buildings to issue a permit for a 668-foot spear sticking into the flank of the Upper West Side. The narrow, stretched-out tower designed by Elkus Manfredi reaches its kinda–sorta–neo–Art Deco–ish crown via a series of setbacks that make it look like a staircase in the wrong aspect ratio. Any tall building can unleash the usual It’s out of character! versus More housing now! shoutfest, but this one has turned area residents into self-appointed land-use experts. If you walk up Broadway and overhear someone saying “gerrymandered lot,” chances are they’re talking about 200 Amsterdam rather than congressional districts.

If the ruling stands, Upper West Siders will witness a slow-motion decapitation from the inside out, which is about as gruesome as it sounds. “Taking down a building is more surgical than erecting one,” says Jay Badame, the president of construction management at the engineering firm AECOM. “It’s become an art and a science combined.”
The unbuilding of skyscrapers happens regularly in New York, and even lopping the top off isn’t unprecedented. The same fate befell 108 East 96th Street in 1991, when developers agreed out of court to slice 12 illegal floors off a 31-story tower while it was still under construction. And truncating 200 Amsterdam is a relatively routine operation when compared to the razing of the 700-foot Union Carbide Building at 270 Park Avenue, eventually to be replaced by a 1,200-foot headquarters for JP Morgan. In a city too packed for implosion or wrecking balls, disassembling an entire structure is slow and dangerous work, planned by specialized engineers. (Excising one part, even as residents are moving into the rest, gives the process an extra layer of delicacy.) When the building is going up, a crane hoists equipment and materials into place as they’re needed, often directly from the back of a flatbed truck. When it’s coming down, though, you need someplace to toss all the rubble, and piling the detritus of too many discarded stories on the floor below can get you into structural trouble.
So can yanking out a length of steel without the proper preparation. “As you’re deconstructing the building, you’re also bracing it, so you don’t leave something freestanding that can topple over,” says the Department of Buildings first deputy commissioner Gus Sirakis. It’s an elaborate puzzle that can involve as much building as breakage: shoring up floors, supporting steel skeletons, erecting scaffolding, installing chutes, and positioning cranes. Sirakis reviews the options for avoiding collapse, sounding like he’s planning a military operation. “You can sling a beam to the crane while it’s being cut. You might have an iron worker doing the torch cutting but it’s not the same as bolting up your spandrel beam in place. You might have to pull exterior frame inward as you cut it. Sometimes you do the demolition with a grappling arm, cut and grip the [structural] member at the same time.”

As is often the case, disaster helped write the procedures. In 2007, a fire broke out near the top of the Deutsche Bank building on Liberty Street, which had been irreparably damaged on 9/11 and was being torn down. The firefighters who responded discovered that workers had disabled the sprinkler system and the standpipe, laid wooden platforms over one staircase, and partially demolished another. Two firefighters were killed and dozens were injured. The city revised its regulations, requiring safety systems to remain functional even as the structure around them dissolves.
As with everything about living in New York, tight quarters make everything more complicated. At 270 Park, there was nowhere to plant a tower crane at ground level, so Tishman, the company running the project, built a temporary structural balcony onto the doomed tower. It’s like giving your executioner a piggyback ride so he can reach your throat.
 

David Goldsmith

All Powerful Moderator
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Related story:
Construction On 45 Park Place Remains Stalled In Tribeca

YIMBY’s Turkey Week tour of stalled projects continues with 45 Park Place, a 667-foot-tall residential skyscraper in Tribeca. Designed by SOMA Architects with Ismael Leyva Architects as the executive and residential architect, the 43-story tower has been on hold since late 2019. Sharif el-Gamal of Soho Properties is developing the project, with Piero Lissoni serving as the interior designer. 45 Park Place is located between Church Street and West Broadway, just to the north of the border with the Financial District. Permasteelisa Group and Vidaris are the façade consultants.
Photos from above and below the slender reinforced concrete superstructure show the glass curtain wall about two-thirds of the way toward its stepped roof parapet. The construction crane still hangs off the partially cantilevering western elevation. We hope to see activity resume some time in the near future.

Work has also yet to commence on an annex of the property at 51 Park Place, which is slated to become a 71-foot-tall, 16,000-square-foot Islamic cultural center. YIMBY last heard that Scott Newman of Cooper Robertson is listed as the architect for the upcoming facility, though it’s unclear if it is still planning to be built. If so, it would rise directly to the west of the lower floors of SOMA’s skyscraper.
A revised completion date for 45 Park Place has yet to be announced.
 

David Goldsmith

All Powerful Moderator
Staff member
HFZ lays off staff as legal and financial problems mount
Developer contending with lawsuits and foreclosure actions tied to several condo projects

HFZ Capital Group has laid off a number of employees as the developer’s financial and legal troubles mount.
Two sources familiar with the matter said the layoffs and furloughs mainly affected people working in the construction side of the business and also those at the company’s main office at 600 Madison Avenue.

“Unfortunately, due to the prolonged nature of the pandemic and its expected timeline, HFZ has to furlough some of its employees, with the goal being to bring them back,” a spokesperson for HFZ said in an email. “Other employees were laid off.”

The developer has been under pressure as it deals with a slew of lawsuits from lenders and subcontractors over delinquent loans and unpaid bills tied to several of the firm’s Manhattan condos.
The layoffs, which come before the holiday period and as New Yorkers brace for another wave of Covid-19, will affect an estimated 20 to 30 jobs, according to a person with knowledge of the situation. That number could not be independently corroborated by The Real Deal.
The first signs of HFZ’s financial troubles emerged in September, when the mezzanine lender on four of the developer’s Manhattan condo projects, CIM Group, hired a brokerage to market the positions for a UCC foreclosure auction.

In October, Starwood Property Trust sued HFZ for allegedly defaulting on loan payments at a co-op conversion at 344 West 72nd Street.
Then, this month, the lender on HFZ’s planned Upper East Side condo project alleged that HFZ owed more than $18 million in defaulted debt. The loans had been personally guaranteed by Ziel Feldman and his number two, Nir Meir, the lawsuit said.

Last week, Feldman listed his triplex penthouse on the Upper East Side for $39 million. The 6,200-square-foot unit stretches across three floors at the Marquand building, which HFZ converted into condos in 2013.
HFZ was granted some relief this month when it went to court to stop CIM from going ahead with the UCC foreclosure auction, and a judge granted a temporary hold.

HFZ had argued the auction — for loans tied to condos at 88 and 90 Lexington Avenue, The Astor at 235 West 75th Street, and Fifty Third and Eighth at 301 West 53rd Street — was “commercially unreasonable” and a “predatory attempt to capitalize on the Covid-19 pandemic,” which would allow CIM to take over the properties.
The next court hearing is scheduled for Nov. 30.
 
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