The Real Deal: Lawsuit
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The Real Deal: Marc Held, Partner at Held & Hines, LLP quoted re: Lawsuit
Rector Square unit owners sue Levy, Shvo, Cooper Square for $100 million
November 20, 2009 03:00PM By David Jones
From left: Yair Levy, Michael Shvo, and Rector Square at 225 Rector Place
A group of 45 unit owners at Rector Square condominium in Battery Park filed a $100 million lawsuit against developer Yair Levy, superbroker Michael Shvo and building manager Cooper Square Realty, alleging widespread fraud, negligence and misrepresentation.
According to the suit filed yesterday in New York State Supreme Court, Levy, the owner of YL Real Estate Developers, defaulted on the mortgage loan with Anglo Irish Bank, failed to complete construction of the building, converted reserve funds for his own use and failed to make PILOT payments to the Battery Park City Authority.
The plaintiffs claim the sponsor and broker misrepresented the quality of the building to potential purchasers.
“Instead of a building of their dreams they bought into a building of nightmares,” said Marc Held, attorney for the unit owners.
Levy also allegedly sold a block of 15 apartments to an Italian university for use as dorm rooms for exchange students and rented out apartments to Marriott for use as extended-stay hotels, violating local zoning laws.
Shvo, whose firm sold units in the building, is accused of false advertising and misrepresenting the amenities, renovations to the building, construction schedule and otherwise acting in bad faith with the owners who bought more than 45 units in the building.
Cooper Square, whose firm managed the building, is accused of spending money from the building’s reserve and working fund for other purposes; taking management fees out of the building’s operating account; co-mingling security deposits and move-in deposits with the building account and failure to monitor the use of these various accounts.
Levy, Shvo and Cooper Square officials were not immediately available for comment.
Rector Square, a 304-unit building at 225 Rector Place, became one of the biggest conversion disasters in the history of New York, after Levy defaulted on $165 million in mortgage loans by Anglo Irish Bank and Fortress Investment Group. About 230 units were unsold and several dozen apartments were occupied by affordable housing tenants.
Levy originally purchased the former rental building, known as Parc Place, from Related Cos. in 2005, under a deal that included Columbus Park, another Related rental at 101 West 87th Street.
In January, The Real Deal first reported a mysterious shut down of the Rector Square sales office and noted that construction at the property has ceased.
Anglo Irish filed suit to foreclose and eventually hired veteran trust attorney Michael Miller to take over as receiver. Miller has since hired Related to take over as managing agent of the building, and Anglo Irish is expected to put the building on theauction block.
Levy, in an affidavit filed earlier this year, said that Cooper Square withdrew $300,000 in PILOT funds designated for Battery Park City Authority and used the money to cover its own management funds. State and local regulators began an investigation into the Rector Square reserve fund, as spending reserve fund money is a criminal offense under New York City law.
