Crain’s: Condo King
- Posted on: Dec 6 2009
Crain’s: Marc Held, Partner, Held & Hines, LLP is Quoted Re: Condo King
Condo king dethroned
With one building gone, more on brink, Yair Levy leads pack of city’s troubled developers
By Amanda Fung
Uptown, Mr. Levy’s luck is no better. In September, after the lender on his Park Columbus conversion on West 87th Street sued him for defaulting on his loan, Mr. Levy filed for bankruptcy on the property.
Many developers have fallen on hard times in recent years. Few have fallen further and faster than Mr. Levy, the man who just six years ago was widely hailed as New York’s “condo king” for his rapid-fire efforts to snap up faded downtown office buildings and convert them to upscale residences.
Mr. Levy’s company, YL Real Estate Developers, which he founded in 1998, soared to prominence on the back of ever-bigger deals. His activity peaked in 2005, when he snapped up three huge apartment buildings, planning to convert their nearly 1,000 units to condos. Those three—Sheffield57, Rector Square and Park Columbus—were supposed to solidify his reign. Instead, they are proving his undoing.
“He is a developer who tried to ride the real estate wave and was unsuccessful,” says Marc Held of law firm Lazarowitz & Manganillo, who is representing the Rector Square tenants. “Unfortunately, with his mistake, a lot of condo owners got hurt.”
Mr. Levy’s empire began to unravel in spectacular fashion this summer when lenders foreclosed on the 597-unit Sheffield57—making it the biggest failed condo conversion in city history—and auctioned it off for $120 million. Mr. Levy, along with partners Kent Swig and Serge Hoyda, had bought the property for $418 million only four years earlier.
Infamous ice-bucket caper
Before that deal fell apart, Mr. Levy completed two days of community service for assaulting Mr. Swig with an ice bucket during an acrimonious business meeting.
Mr. Levy points out that many of his peers are also struggling. “Everybody is in trouble,” he says, blaming his woes on his involvement with “too many condo projects at the same time when the market collapsed.”
Today, his biggest tests are Rector Square and Park Columbus, which he bought from The Related Companies in 2005 in a single deal valued at $165 million. Now he is on the verge of losing at least $25 million that he invested in Rector Square.
Besides defaulting on his mortgage at Rector Square, Mr. Levy is being accused of abandoning renovations and stealing reserve funds from the building. Mr. Levy says he never stole and blames the lack of funds to finish Rector Square on his lender, Anglo Irish Bank, which he says failed to release funds as promised. The bank says Mr. Levy defaulted and failed to pay required fees.
The situation at the 95-unit Park Columbus is similar. He defaulted on a $20 million loan there. Then, the day before the foreclosure auction in September, he petitioned to block it—and promptly filed for bankruptcy on the building. According to the filing, the property has $50 million in debt.
“We expect the judge to terminate the stay and allow the foreclosure,” says Harvey Strickon of law firm Paul Hastings Janofsky & Walker, who represents Garrison Investment Group, which recently bought the loan.
Meanwhile, Mr. Levy’s investment in 620 Sixth Ave., a 700,000-square-foot Chelsea office and retail building that he owns with Meyer Chetrit and Charles Daya, is also in trouble. The trio has defaulted on its $235 million mortgage and $30 million mezzanine loan.
Asked about the condition of YL Real Estate Developers after all these setbacks, Mr. Levy would only say the firm is currently going through a reorganization.
To be sure, the 61-year-old has come a long way from his roots in Israel, as the son of a real estate broker and a mother who made couture dresses. His first foray as an entrepreneur came in 1972 when he launched a fashion company with his brother in New York. Two years later, he says, he used the profits to snap up his first building, paying $1 million in cash for a mixed-use property at East 58th Street and Lexington Avenue.
His deals got bigger as the market roared upward. Two of the earlier ones were downtown, a 14-unit condo project on Fulton Street and a 50-unit condo on John Street. One of his most successful transactions came in 2004 when he sold a building on East 23rd Street for $82 million. He had bought the building for roughly $30 million. He poured most of that gain into Sheffield57, Rector Square and Park Columbus.
“He is known as a reputable investor,” says Azrita Aghravi, a broker at Eastern Consolidated who has worked with Mr. Levy. “You just can’t predict the market.”
Despite his woes, Mr. Levy is confident he will prevail at Rector Square and Park Columbus. He claims he can obtain the funds needed to complete both.
While most observers say his chances are dim, Mr. Levy insists that, one way or another, he will be back.
“Even if I reach zero,” he vows, “I have enough experience to make money with no money.”