In a major victory for residential landlords, a New York State appeals court late last month overturned two controversial rulings that prevented the eviction of market-rate tenants at Manhattan House and Sheffield57, two of the biggest condominium conversions in the city’s history.
In March 2007, Housing Court Judge David Cohen blocked Sheffield57 sponsor Kent Swig from evicting 23 market-rate tenants and later that year hindered Manhattan House's sponsors, O’Connor Capital Partners, from evicting 29 tenants.
In his decisions, Cohen said that the intent of New York State’s 1982 Martin Act was to protect all tenants from losing their homes in case of condo or co-operative conversions.
However, the three-judge panel argued in the November decision that since the leases had expired prior to the state Attorney General accepting the “red herring” plan, which outlines the specifics of the conversion, the Martin Act does not protect them.
“Where the tenant holds over after the expiration of the lease term, the landlord is not required to allege or prove any basis for eviction other than the expiration of the lease,” the court wrote in the Manhattan House case.
In 2005, a partnership led by Swig Equities acquired the Sheffield, which later changed to Sheffield57, at 322 West 57th Street, then an 845-unit rental building, for $418 million. That same year, O’Connor Capital Partners teamed up with developer Richard Kalikow to buy the 583-unit Manhattan House, at 200 East 66th Street, for $623 million, a U.S. record price for a single residential building. In late 2007, O’Connor bought out Kalikow after a lengthy court battle.
In each case, the sponsors sought the eviction of all market-rate tenants so they could convert the non-regulated rental apartments into condo units. The Manhattan House conversion is valued at $1.1 billion, making it one of the most expensive condominium conversions in U.S. history.
Lawyers for the tenants still maintain that market-rate tenants should be protected under the Martin Act.
“I think Judge Cohen’s decision -- the decision that they reversed -- was consistent with the legislative intent and consistent with good case law,” said attorney Kevin McConnell, who represents Manhattan House, as well as tenants at Sheffield57.
“I virulently believe these tenants deserve protection from eviction," he said.
At the time of the March 2007 Sheffield ruling, more than 7,000 rental apartments at 60 buildings were being converted in the city. Many of those conversions have slowed down or stopped, as the credit markets have made it difficult for apartment buyers to get financing.
McConnell said tenants at Manhattan House are deciding whether to appeal. He added that he could not comment on behalf of his Sheffield57 clients, because he had not discussed the case with them at press time.
Manhattan House and Sheffield57 officials were not immediately available for comment.
December 03, 2008, David Jones, The Real Deal
Thursday, December 04, 2008
Saturday, November 22, 2008
Nordbank, Germany Agree on Terms of Bailout; May Seek Up to $37 Billion, Sell Assets
German state-owned bank HSH Nordbank AG said it may seek as much as 30 billion euros ($37.6 billion) from the German Financial Markets Stabilization fund.
The stabilization fund, known as SoFFin, and HSH Nordbank agreed on the terms today, HSH said today in an e-mailed statement. The Hamburg-based bank also may sell some assets.
Banks worldwide were forced to seek help from shareholders and governments after the September bankruptcy of Lehman Brothers Holdings Inc. froze credit markets. German state-owned bank WestLB AG of Dusseldorf has also said it would ask for debt guarantees and consider requesting capital from the state. Commerzbank said Nov. 3 it will get 8.2 billion euros of capital from the state, making it Germany's first publicly traded lender to get cash from the rescue fund.
``This decision is a clear signal: it strengthens our bank and creates sufficient flexibility for the further development of our business model,'' HSH Chief Executive Officer Dirk Jens Nonnenmacher said in the statement. ``We are working on a set of concrete measures, with which we will advance the future strategy of HSH Nordbank.''
The bank is also considering selling assets and expects that these measures will help increase the company's capital to at least 8 percent, according to the statement. ``Shareholders and management will discuss the exact arrangements over the coming weeks,'' HSH said.
By Nadja Brandt, Nov. 21, 2008, Bloomberg
The stabilization fund, known as SoFFin, and HSH Nordbank agreed on the terms today, HSH said today in an e-mailed statement. The Hamburg-based bank also may sell some assets.
Banks worldwide were forced to seek help from shareholders and governments after the September bankruptcy of Lehman Brothers Holdings Inc. froze credit markets. German state-owned bank WestLB AG of Dusseldorf has also said it would ask for debt guarantees and consider requesting capital from the state. Commerzbank said Nov. 3 it will get 8.2 billion euros of capital from the state, making it Germany's first publicly traded lender to get cash from the rescue fund.
``This decision is a clear signal: it strengthens our bank and creates sufficient flexibility for the further development of our business model,'' HSH Chief Executive Officer Dirk Jens Nonnenmacher said in the statement. ``We are working on a set of concrete measures, with which we will advance the future strategy of HSH Nordbank.''
The bank is also considering selling assets and expects that these measures will help increase the company's capital to at least 8 percent, according to the statement. ``Shareholders and management will discuss the exact arrangements over the coming weeks,'' HSH said.
By Nadja Brandt, Nov. 21, 2008, Bloomberg
A Good Example as a Neighbor?
For several years, tenants at Manhattan House, the huge landmark white brick apartment complex at 200 East 66th Street, have complained bitterly about noisy construction, dust, debris and environmental hazards as many of the 581 apartments in five connected towers were renovated and converted to condominiums.
In the last few weeks, even as dozens of new owners closed on apartments, tenants have been considering whether to go to court again about damage they say was deliberately done by sponsors to drive tenants out.
But perhaps there is room in this tough Manhattan street brawl for a kinder, gentler approach. Property records filed last week show that in early November, Jeffrey Hollender, a businessman who travels the country lecturing business leaders on corporate responsibility and cooperation, and his wife, Sheila Hollender, paid $2.2 million for a 12th-floor two-bedroom apartment at Manhattan House.
Mr. Hollender, a native New Yorker, moved to Vermont where he developed a business, Seventh Generation, a company that describes itself as selling “authentic, safe, and environmentally responsible products for a healthy home.” The company, of which he is the president and “chief inspired protagonist,” did about $100 million in sales last year.
What matters most in business, Mr. Hollender says, is not growth, quarterly profits and shareholder value, but good corporate citizenship.
“We must ensure that the practice of corporate responsibility is spread to every sector of society,” Mr. Hollender said in a statement a few weeks ago. “Now is not the time to retreat in fear, but forge ahead to create a better and brighter world for all.”
Rafael Urquia II, a lawyer who has led a Manhattan House tenant group through several bumpy years, said of his neighbor-to-be, “There’s some irony in that.”
Mr. Hollender had speaking engagements on the West Coast last week and did not respond to several requests for comment.
Adam Leitman Bailey, a lawyer for the tenants’ group, would not comment on the conflict.
Dolly Lenz, the broker at Prudential Douglas Elliman who heads the sales effort at Manhattan House, said that the developers had been acting responsibly in carrying out the conversion.
She said she didn’t think the complaints were “anything at all unusual.” “It is the tenant-owner thing that always happens in a conversion,” she said.
By Josh Barbanel, Big Deal, New York Times
November 23, 2008
In the last few weeks, even as dozens of new owners closed on apartments, tenants have been considering whether to go to court again about damage they say was deliberately done by sponsors to drive tenants out.
But perhaps there is room in this tough Manhattan street brawl for a kinder, gentler approach. Property records filed last week show that in early November, Jeffrey Hollender, a businessman who travels the country lecturing business leaders on corporate responsibility and cooperation, and his wife, Sheila Hollender, paid $2.2 million for a 12th-floor two-bedroom apartment at Manhattan House.
Mr. Hollender, a native New Yorker, moved to Vermont where he developed a business, Seventh Generation, a company that describes itself as selling “authentic, safe, and environmentally responsible products for a healthy home.” The company, of which he is the president and “chief inspired protagonist,” did about $100 million in sales last year.
What matters most in business, Mr. Hollender says, is not growth, quarterly profits and shareholder value, but good corporate citizenship.
“We must ensure that the practice of corporate responsibility is spread to every sector of society,” Mr. Hollender said in a statement a few weeks ago. “Now is not the time to retreat in fear, but forge ahead to create a better and brighter world for all.”
Rafael Urquia II, a lawyer who has led a Manhattan House tenant group through several bumpy years, said of his neighbor-to-be, “There’s some irony in that.”
Mr. Hollender had speaking engagements on the West Coast last week and did not respond to several requests for comment.
Adam Leitman Bailey, a lawyer for the tenants’ group, would not comment on the conflict.
Dolly Lenz, the broker at Prudential Douglas Elliman who heads the sales effort at Manhattan House, said that the developers had been acting responsibly in carrying out the conversion.
She said she didn’t think the complaints were “anything at all unusual.” “It is the tenant-owner thing that always happens in a conversion,” she said.
By Josh Barbanel, Big Deal, New York Times
November 23, 2008
Tuesday, November 11, 2008
HSH Nordbank Chief Berger Resigns, CFO Takes Over
HSH Nordbank AG, the only German state bank partially owned by private investors, said Chief Executive Officer Hans Berger resigned, a week after the lender asked for government help.
The Hamburg-based bank accepted the 58 year-old CEO's offer to step down and will ask Chief Financial Officer Dirk Jens Nonnenmacher, 45, to take charge until further notice, HSH Nordbank said today in an e-mailed statement.
``The management board failed to foresee the degree of intensity and duration of the crisis and the risks for the bank's earnings that have come to light,'' Berger said in the statement. HSH Nordbank will post a ``negative result'' this year and ``I take responsibility for this,'' he added.
HSH Nordbank announced Nov. 3 that it will seek 30 billion euros ($38.6 billion) in debt guarantees from the government amid the worst financial crisis since the Great Depression.
Banks from UBS AG in Zurich to New York-based Citigroup Inc. are being forced to seek government rescues after the September bankruptcy of Lehman Brothers Holdings Inc. froze credit markets.
The bank last week reported a nine-month loss of almost 360 million euros after writedowns of 720 million euros. The lender said at the time that it may seek a capital injection from the government, as part of the country's 500 billion-euro financial industry rescue package.
Berger became HSH Nordbank's head in January 2007, having previously worked as deputy CEO. Nonnenmacher assumed the position of CFO in October 2007.
Georg Funke resigned Oct. 7 as CEO of Hypo Real Estate Holding AG after the German commercial property lender needed a 50 billion-euro bailout.
By Jann Bettinga, Nov. 10, 2008, Bloomberg
The Hamburg-based bank accepted the 58 year-old CEO's offer to step down and will ask Chief Financial Officer Dirk Jens Nonnenmacher, 45, to take charge until further notice, HSH Nordbank said today in an e-mailed statement.
``The management board failed to foresee the degree of intensity and duration of the crisis and the risks for the bank's earnings that have come to light,'' Berger said in the statement. HSH Nordbank will post a ``negative result'' this year and ``I take responsibility for this,'' he added.
HSH Nordbank announced Nov. 3 that it will seek 30 billion euros ($38.6 billion) in debt guarantees from the government amid the worst financial crisis since the Great Depression.
Banks from UBS AG in Zurich to New York-based Citigroup Inc. are being forced to seek government rescues after the September bankruptcy of Lehman Brothers Holdings Inc. froze credit markets.
The bank last week reported a nine-month loss of almost 360 million euros after writedowns of 720 million euros. The lender said at the time that it may seek a capital injection from the government, as part of the country's 500 billion-euro financial industry rescue package.
Berger became HSH Nordbank's head in January 2007, having previously worked as deputy CEO. Nonnenmacher assumed the position of CFO in October 2007.
Georg Funke resigned Oct. 7 as CEO of Hypo Real Estate Holding AG after the German commercial property lender needed a 50 billion-euro bailout.
By Jann Bettinga, Nov. 10, 2008, Bloomberg
Friday, November 07, 2008
Elliman partner buys at Manhattan House with only 10% down payment
Elliman retail partner buys at Manhattan House
By David Jones, The Real Deal, November 7, 2008
Joseph Aquino, executive vice president of retail leasing and sales at Prudential Douglas Elliman, has closed on a $1.48 million apartment at Manhattan House, the controversial Upper East Side condominium that his firm is marketing, according to sources and government records.
The deal makes Aquino one of the first buyers at the 200 East 66th Street tower, which just began closing apartment sales last month following a year-long conversion process.
“He bought when the offering was first presented,” said Faith Hope Consolo, chairman of the retail leasing and sales division at Elliman and Aquino's long-time business partner. “He’s very happy. It’s a wonderful building.” Aquino was not immediately available for comment.
The move comes at a time when several major commercial banks, including Citibank, have decided not to underwrite mortgage loans at Manhattan House or have asked buyers for down payments of up to 50 percent. JPMorgan Chase officials said they were only following guidelines set by Fannie Mae and Freddie Mac, which call for banks to lend in new condo conversions only when more than half of available units are sold.
As of this week, more than 120 apartments in the 583-unit building are under contract, and 15 deals have closed. About six apartments were sold for cash, with the remaining were financed with down payments of at least 25 percent, according to sources and city records. The building has another 190 rent-stabilized and 35 market-rate rental tenants.
Manhattan House officials have been under pressure to boost sales at the building. The sponsor, O’Connor Capital Partners, lost a December 2007 court battle to evict existing 31 market-rate tenants, which left him with fewer available units to sell. The building's Germany-based lender, HSH Nordbank was forced to assume the risk on the Manhattan House loan after a deal to syndicate it fell apart.
Aquino and his wife Suzanne closed on their apartment, unit A1107, late last month. The 1,113-square-foot, one-bedroom apartment was originally listed at $1.48 million and was taken off the market nine months ago after the Aquinos signed a contract, according to Streeteasy.com and records filed with the city Department of Finance.
City records show that JPMorgan underwrote one mortgage for $1.1 million and a second mortgage for $234,142 for the Aquino unit, leaving a down payment balance of about 10 percent.
Prudential Vice Chairman Dolly Lenz, who leads the Elliman brokerage team selling units in Manhattan House, confirmed that Aquino bought a unit at Manhattan House, but declined to offer any other details about his purchase or the overall pace of sales at the building.
“We can confirm that Mr. Aquino has bought in Manhattan House and the relationship with our buyers prohibits us from providing purchase details with the media.”
One high-profile buyer, according to published reports, is Manchester United manager Sir Alex Ferguson, who has signed a contract to buy a three-bedroom apartment at Manhattan House. Retired Miami Dolphins legend Dan Marino previously shopped around for apartments at Manhattan House. CNBC superstar Maria Bartiromo is a former Manhattan House resident, but sources say she moved out after the conversion process began in 2007.
By David Jones, The Real Deal, November 7, 2008
Joseph Aquino, executive vice president of retail leasing and sales at Prudential Douglas Elliman, has closed on a $1.48 million apartment at Manhattan House, the controversial Upper East Side condominium that his firm is marketing, according to sources and government records.
The deal makes Aquino one of the first buyers at the 200 East 66th Street tower, which just began closing apartment sales last month following a year-long conversion process.
“He bought when the offering was first presented,” said Faith Hope Consolo, chairman of the retail leasing and sales division at Elliman and Aquino's long-time business partner. “He’s very happy. It’s a wonderful building.” Aquino was not immediately available for comment.
The move comes at a time when several major commercial banks, including Citibank, have decided not to underwrite mortgage loans at Manhattan House or have asked buyers for down payments of up to 50 percent. JPMorgan Chase officials said they were only following guidelines set by Fannie Mae and Freddie Mac, which call for banks to lend in new condo conversions only when more than half of available units are sold.
As of this week, more than 120 apartments in the 583-unit building are under contract, and 15 deals have closed. About six apartments were sold for cash, with the remaining were financed with down payments of at least 25 percent, according to sources and city records. The building has another 190 rent-stabilized and 35 market-rate rental tenants.
Manhattan House officials have been under pressure to boost sales at the building. The sponsor, O’Connor Capital Partners, lost a December 2007 court battle to evict existing 31 market-rate tenants, which left him with fewer available units to sell. The building's Germany-based lender, HSH Nordbank was forced to assume the risk on the Manhattan House loan after a deal to syndicate it fell apart.
Aquino and his wife Suzanne closed on their apartment, unit A1107, late last month. The 1,113-square-foot, one-bedroom apartment was originally listed at $1.48 million and was taken off the market nine months ago after the Aquinos signed a contract, according to Streeteasy.com and records filed with the city Department of Finance.
City records show that JPMorgan underwrote one mortgage for $1.1 million and a second mortgage for $234,142 for the Aquino unit, leaving a down payment balance of about 10 percent.
Prudential Vice Chairman Dolly Lenz, who leads the Elliman brokerage team selling units in Manhattan House, confirmed that Aquino bought a unit at Manhattan House, but declined to offer any other details about his purchase or the overall pace of sales at the building.
“We can confirm that Mr. Aquino has bought in Manhattan House and the relationship with our buyers prohibits us from providing purchase details with the media.”
One high-profile buyer, according to published reports, is Manchester United manager Sir Alex Ferguson, who has signed a contract to buy a three-bedroom apartment at Manhattan House. Retired Miami Dolphins legend Dan Marino previously shopped around for apartments at Manhattan House. CNBC superstar Maria Bartiromo is a former Manhattan House resident, but sources say she moved out after the conversion process began in 2007.
Friday, October 31, 2008
Manhattan House faces lending woes
Manhattan House faces lending woes
David Jones, The Real Deal, October, 31, 2008
The record $1.1 billion Manhattan House conversion on the Upper East Side has run into resistance from several major commercial banks that have either refused to finance condo deals there or demanded exorbitant down payments from contracted buyers.
Sources familiar with the building said at least a dozen condo buyers have either been turned down for loans, or asked to provide 30 to 50 percent cash deposits, which in some cases forced them to postpone the scheduled closing of their units.
As a result, some buyers fear they will have to purchase their apartments entirely in cash or risk walking away from the building because the condo agreements did not include a mortgage contingency clause.
"They got caught in the perfect storm on the precipice of this [credit market] disaster," said a source.
Manhattan House is one of the city's largest and most high-profile condo conversions. But, it is not the only condo building in New York facing problems. Buyers have begun to bail out of condos like 25 Broad and 20 Pine Street in the Financial District, while lenders have shied away from some Battery Park City buildings because they sit on long-term ground leases.
According to sources and records filed with the city Department of Finance, at least eight of the more than 120 apartments sold at Manhattan House have closed since the condo plan was approved by state regulators. Of those eight, four sales were cash transactions, three were loans approved by Wells Fargo and one was a loan approved JPMorgan Chase.
Neal Bader, area manager at Wells Fargo Home Mortgage, confirmed that the bank has pre-approved the building and is actively working with buyers to finance apartment deals.
"There is nothing inherent about Manhattan House or the financial efficacy of that building that would have any impact on getting lower loan to value," said Bader.
However, a Citibank spokesman confirmed that the bank will not write loans to finance Manhattan House buyers, saying the building did not meet Fannie Mae/Freddie Mac guidelines, which are used to assess risk levels in newly constructed or converted condos. "We might look at that building in the future," the spokesman said.
JPMorgan Chase spokesman Mike Fusco, while declining to comment on Manhattan House specifically, said Fannie and Freddie "are asking us to make loans only if 51 percent of the units are sold at presale. He added, however, that the bank is actively pursuing new loans to fill the void left by other conservative or collapsed banks, and during the second-quarter had the biggest year-over-year market share gain among the nation's top lenders.
The decisions come at a critical time for Manhattan House owner O'Connor Capital Partners, which recently sold the building's retail space for $86 million and used part of the proceeds to pay down its loan balance from German-lender HSH Nordbank.
In October 2007, the New York-based developer borrowed $750 million from HSH Nordbank to finance the conversion of Manhattan House, which was acquired for a record $623 million in 2005.
HSH Nordbank initially syndicated the loan among a group of banks, giving each a piece of the loan and reducing the risk for all of the lenders. The banks involved in the deal included Emigrant Savings, Bank of America, Bank of New York, HSBC, ING, M&T and Wells Fargo.
However, a September report in Commercial Mortgage Alert confirmed that the partner banks forced HSH to take the loan back, amid concerns about the conversion. The report said HSH would cut most of its New York staff and curtail lending in the U.S., where it had about $6 billion in mortgages that it was unable to syndicate.
HSH Nordbank and Manhattan House officials declined comment.
Legal and financial experts said the tight lending environment not only reflects increased concern about financing highly-leveraged projects, but also highlights the inability to securitize super jumbo loans in the multi-million dollar range. Loans of this size are often considered "portfolio loans" that would be carried on the banks' own books and not sold off in the secondary market."
Most lenders have completely changed their loan-to-value guidelines," said Debra Schultz, director and senior mortgage consultant at Manhattan Mortgage Co., the largest residential mortgage broker in New York. "If you want to borrow 90 percent on a $3 million to $4 million property, they want no part of it."
Schultz said that many of her wealthy clients cannot get financing from commercial banks, forcing her to use private lenders, which include hedge funds and the private banking departments of many investment banks.
Manhattan House, with a total of 583 total units, has a large number of apartments that have not been sold, or even been renovated yet, which means the developer will need to spend additional funds on construction and find a way to generate revenue in a weak real estate market.
Katherine Fleming, a Manhattan House tenant since 1991, just closed a deal to buy her apartment for $1.55 million in cash and remains confident in the building's performance. "The building has a future or I wouldn't have put my money down," she said.
Manhattan House has about 190 rent-stabilized tenants and 35 market-rate tenants. City records show that the eight recorded sales range from about $837,343 to $2.72 million.
Adam Leitman Bailey, attorney for the Manhattan House Tenants Association and an advisor to some of the buyers, declined comment.
Critics of the building note that O'Connor and former partner Richard Kalikow bought Manhattan House at the height of the real estate boom for a record $623 million, which averages more than $1 million per apartment. So even if O'Connor were to consider renting out units, he would never be able to generate enough income to pay his "monthly nut," sources said.
"He paid way too much to justify it as a rental," said David Berger, managing principal at Rosewood Realty Group. "In a good market the numbers wouldn't underwrite as a rental."
As noted earlier, O'Connor is not the only new condo facing difficulties.
At 20 Pine Street in the Financial District, multiple buyers have filed suit to get their deposits back, citing extensive delays, and more than 50 units have been placed in the rental market, according to StreetEasy.
And, developer Kent Swig is facing lawsuits from unpaid contractors at 25 Broad Street and at the Sheffield at 322 West 57th Street, He recently shut down his entire 25 Broad sales office and some buyers have said they will walk from their deposits.
"The very aggressive people who banked on these projects selling out at a very large sellout number are going to be faced with challenges," said one leading condo broker, who asked not to be identified.
"When anybody in Manhattan House wants to sell their [unit] they're going to be competing with the sponsor."
Herrick Feinstein attorney Doug Heller said one of his clients, a developer with multiple condo projects, has been unable to get financing for many of his buyers. Heller worries that new government regulations will further limit the ability of condo buyers to qualify for financing.
"What I'm hearing from my clients is that this might even be the tip of the iceberg," he said.
David Jones, The Real Deal, October, 31, 2008
The record $1.1 billion Manhattan House conversion on the Upper East Side has run into resistance from several major commercial banks that have either refused to finance condo deals there or demanded exorbitant down payments from contracted buyers.
Sources familiar with the building said at least a dozen condo buyers have either been turned down for loans, or asked to provide 30 to 50 percent cash deposits, which in some cases forced them to postpone the scheduled closing of their units.
As a result, some buyers fear they will have to purchase their apartments entirely in cash or risk walking away from the building because the condo agreements did not include a mortgage contingency clause.
"They got caught in the perfect storm on the precipice of this [credit market] disaster," said a source.
Manhattan House is one of the city's largest and most high-profile condo conversions. But, it is not the only condo building in New York facing problems. Buyers have begun to bail out of condos like 25 Broad and 20 Pine Street in the Financial District, while lenders have shied away from some Battery Park City buildings because they sit on long-term ground leases.
According to sources and records filed with the city Department of Finance, at least eight of the more than 120 apartments sold at Manhattan House have closed since the condo plan was approved by state regulators. Of those eight, four sales were cash transactions, three were loans approved by Wells Fargo and one was a loan approved JPMorgan Chase.
Neal Bader, area manager at Wells Fargo Home Mortgage, confirmed that the bank has pre-approved the building and is actively working with buyers to finance apartment deals.
"There is nothing inherent about Manhattan House or the financial efficacy of that building that would have any impact on getting lower loan to value," said Bader.
However, a Citibank spokesman confirmed that the bank will not write loans to finance Manhattan House buyers, saying the building did not meet Fannie Mae/Freddie Mac guidelines, which are used to assess risk levels in newly constructed or converted condos. "We might look at that building in the future," the spokesman said.
JPMorgan Chase spokesman Mike Fusco, while declining to comment on Manhattan House specifically, said Fannie and Freddie "are asking us to make loans only if 51 percent of the units are sold at presale. He added, however, that the bank is actively pursuing new loans to fill the void left by other conservative or collapsed banks, and during the second-quarter had the biggest year-over-year market share gain among the nation's top lenders.
The decisions come at a critical time for Manhattan House owner O'Connor Capital Partners, which recently sold the building's retail space for $86 million and used part of the proceeds to pay down its loan balance from German-lender HSH Nordbank.
In October 2007, the New York-based developer borrowed $750 million from HSH Nordbank to finance the conversion of Manhattan House, which was acquired for a record $623 million in 2005.
HSH Nordbank initially syndicated the loan among a group of banks, giving each a piece of the loan and reducing the risk for all of the lenders. The banks involved in the deal included Emigrant Savings, Bank of America, Bank of New York, HSBC, ING, M&T and Wells Fargo.
However, a September report in Commercial Mortgage Alert confirmed that the partner banks forced HSH to take the loan back, amid concerns about the conversion. The report said HSH would cut most of its New York staff and curtail lending in the U.S., where it had about $6 billion in mortgages that it was unable to syndicate.
HSH Nordbank and Manhattan House officials declined comment.
Legal and financial experts said the tight lending environment not only reflects increased concern about financing highly-leveraged projects, but also highlights the inability to securitize super jumbo loans in the multi-million dollar range. Loans of this size are often considered "portfolio loans" that would be carried on the banks' own books and not sold off in the secondary market."
Most lenders have completely changed their loan-to-value guidelines," said Debra Schultz, director and senior mortgage consultant at Manhattan Mortgage Co., the largest residential mortgage broker in New York. "If you want to borrow 90 percent on a $3 million to $4 million property, they want no part of it."
Schultz said that many of her wealthy clients cannot get financing from commercial banks, forcing her to use private lenders, which include hedge funds and the private banking departments of many investment banks.
Manhattan House, with a total of 583 total units, has a large number of apartments that have not been sold, or even been renovated yet, which means the developer will need to spend additional funds on construction and find a way to generate revenue in a weak real estate market.
Katherine Fleming, a Manhattan House tenant since 1991, just closed a deal to buy her apartment for $1.55 million in cash and remains confident in the building's performance. "The building has a future or I wouldn't have put my money down," she said.
Manhattan House has about 190 rent-stabilized tenants and 35 market-rate tenants. City records show that the eight recorded sales range from about $837,343 to $2.72 million.
Adam Leitman Bailey, attorney for the Manhattan House Tenants Association and an advisor to some of the buyers, declined comment.
Critics of the building note that O'Connor and former partner Richard Kalikow bought Manhattan House at the height of the real estate boom for a record $623 million, which averages more than $1 million per apartment. So even if O'Connor were to consider renting out units, he would never be able to generate enough income to pay his "monthly nut," sources said.
"He paid way too much to justify it as a rental," said David Berger, managing principal at Rosewood Realty Group. "In a good market the numbers wouldn't underwrite as a rental."
As noted earlier, O'Connor is not the only new condo facing difficulties.
At 20 Pine Street in the Financial District, multiple buyers have filed suit to get their deposits back, citing extensive delays, and more than 50 units have been placed in the rental market, according to StreetEasy.
And, developer Kent Swig is facing lawsuits from unpaid contractors at 25 Broad Street and at the Sheffield at 322 West 57th Street, He recently shut down his entire 25 Broad sales office and some buyers have said they will walk from their deposits.
"The very aggressive people who banked on these projects selling out at a very large sellout number are going to be faced with challenges," said one leading condo broker, who asked not to be identified.
"When anybody in Manhattan House wants to sell their [unit] they're going to be competing with the sponsor."
Herrick Feinstein attorney Doug Heller said one of his clients, a developer with multiple condo projects, has been unable to get financing for many of his buyers. Heller worries that new government regulations will further limit the ability of condo buyers to qualify for financing.
"What I'm hearing from my clients is that this might even be the tip of the iceberg," he said.
O'Connor's Blog
Quinn & Co. Public Relations, the PR firm for O’Connor Capital Partners has just launched a new Manhattan House blog!
Sadly, their blog does NOT allow vistors to post comments.
Feel free to post comments about O'Connor's blog here.
http://manhattanhouse.wordpress.com/
Sadly, their blog does NOT allow vistors to post comments.
Feel free to post comments about O'Connor's blog here.
http://manhattanhouse.wordpress.com/
Wednesday, October 08, 2008
Manhattan House retail sells for less than asking price
Manhattan House retail sells for $14M less than asking
October, 08, 2008, The Real Deal
O'Connor Capital Partners sold the retail portion of the landmark Manhattan House to Madison Capital for $86 million, $14 million less than the asking price.
The 102,842 square feet of retail, parking and office condominiums includes seven street-level stores and four office spaces. O'Connor Capital has already attracted some new tenants to the building, at 200 East 66th Street, including Staples and Aldo.
Manhattan House is comprised of five 22-story buildings, and was originally designed as a rental building in 1952 by Gordon Bunshaft of Skidmore, Owings and Merrill.
A team led by Dolly Lenz of Prudential Douglas Elliman is marketing the 583 residential condos in the mixed-use complex. The attorney general's office approved the conversion of the building from rentals to condos in August.
October, 08, 2008, The Real Deal
O'Connor Capital Partners sold the retail portion of the landmark Manhattan House to Madison Capital for $86 million, $14 million less than the asking price.
The 102,842 square feet of retail, parking and office condominiums includes seven street-level stores and four office spaces. O'Connor Capital has already attracted some new tenants to the building, at 200 East 66th Street, including Staples and Aldo.
Manhattan House is comprised of five 22-story buildings, and was originally designed as a rental building in 1952 by Gordon Bunshaft of Skidmore, Owings and Merrill.
A team led by Dolly Lenz of Prudential Douglas Elliman is marketing the 583 residential condos in the mixed-use complex. The attorney general's office approved the conversion of the building from rentals to condos in August.
Saturday, August 30, 2008
NY Attorney General certifies Manhattan House conversion plan
NY Attorney General certifies Manhattan House conversion plan
August, 27, 2008
New York Attorney General Andrew Cuomo's office has declared effective the plan to convert Manhattan House into condominiums, three years after the building sold for $623 million, according to officials from the tenants' association and developer.
Tenants said they were notified on Aug. 26 that Cuomo's office had accepted the plan earlier in the month, and that the first closings were scheduled to begin sometime between late September to early October.
O'Connor Capital Partners previously met a deadline set by HSH Nordbank to sell at least 15 percent of the available apartments by June 1, or face delays in closing the apartments. Sources said the last official update in June showed that about 110 apartments had been sold.
Streeteasy.com reports the building has 50 units on sale at an average price of $1,624 per square foot, ranging from $722,000 to $6 million.
The declaration represents a significant victory for developer Jeremiah O'Connor, who engineered the $1.1 billion conversion plan that would make Manhattan House one the biggest condo conversions in U.S. history.
Manhattan House officials were not immediately available for comment. Tenant association officials said they were waiting to get additional written confirmation on the plan before commenting.
O'Connor survived a brutal legal fight against N. Richard Kalikow, who partnered with him on the 2006 acquisition from New York Life Insurance Co. He also endured a lengthy set of legal challenges by the Manhattan House Tenants Organization, which fought against the conversion on several fronts, including over whether market rate tenants could be evicted.
O'Connor hired a team led by Prudential Douglas Elliman superbroker Dolly Lenz to market the 583-unit property at 200 East 66th Street, taking out a $750 million loan from HS Nordbank in 2007 to help finance the conversion. Nordbank, like a number of commercial foreign banks, has since shut down much of its major commercial lending in New York.
Author: David Jones, The Real Deal
August, 27, 2008
New York Attorney General Andrew Cuomo's office has declared effective the plan to convert Manhattan House into condominiums, three years after the building sold for $623 million, according to officials from the tenants' association and developer.
Tenants said they were notified on Aug. 26 that Cuomo's office had accepted the plan earlier in the month, and that the first closings were scheduled to begin sometime between late September to early October.
O'Connor Capital Partners previously met a deadline set by HSH Nordbank to sell at least 15 percent of the available apartments by June 1, or face delays in closing the apartments. Sources said the last official update in June showed that about 110 apartments had been sold.
Streeteasy.com reports the building has 50 units on sale at an average price of $1,624 per square foot, ranging from $722,000 to $6 million.
The declaration represents a significant victory for developer Jeremiah O'Connor, who engineered the $1.1 billion conversion plan that would make Manhattan House one the biggest condo conversions in U.S. history.
Manhattan House officials were not immediately available for comment. Tenant association officials said they were waiting to get additional written confirmation on the plan before commenting.
O'Connor survived a brutal legal fight against N. Richard Kalikow, who partnered with him on the 2006 acquisition from New York Life Insurance Co. He also endured a lengthy set of legal challenges by the Manhattan House Tenants Organization, which fought against the conversion on several fronts, including over whether market rate tenants could be evicted.
O'Connor hired a team led by Prudential Douglas Elliman superbroker Dolly Lenz to market the 583-unit property at 200 East 66th Street, taking out a $750 million loan from HS Nordbank in 2007 to help finance the conversion. Nordbank, like a number of commercial foreign banks, has since shut down much of its major commercial lending in New York.
Author: David Jones, The Real Deal
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