The Manhattan House Tenants Group, Inc. has concluded that the amount the Sponsor is contributing to the reserve fund is likely to be "woefully inadequate" to cover the numerous infrastructure problems in the building.
Thursday, December 27, 2007
Tuesday, December 04, 2007
Manhattan House evictions dismissed
December 3, 5:20 pm
David Jones, The Real Deal
A housing court judge has dismissed eviction proceedings against a group of tenants at the famed Manhattan House building on the Upper East Side, a decision that could set back one of the biggest condo conversions in the city's history.
Manhattan House tenants had argued that after the new owners bought the luxury rental complex for a record $625 million in 2005, they failed to renew the leases of hundreds of tenants. Lawyers also argued that the new owners offered bogus renewal leases for at least 11 tenants by asking for excessive rent hikes or lease terms of less than six months.
"The lease offerings were at exorbitant rates that were designed to intimidate and demean us," said Dr. Douglas Altchek, a long-time Manhattan House resident and a plaintiff in the case. "I was never offered a lease, but was told to get out 12 days after my lease expired."
In late October, Manhattan House put more than 70 apartments on sale, with some listing for more than $6 million. The building has 196 rent-stabilized tenants, 58 market rate tenants, 327 vacant apartments and a resident manager, according to the Manhattan House Tenants Group. A total of 31 units have been renovated.
Judge David Cohen ruled on Nov. 28 that the 31 market-rate tenants at the landmark apartment complex were protected from eviction under the Martin Act, a state law that regulates the conversion of residential rental buildings into condominiums. The tenants' attorneys learned of the decision today.
Manhattan House officials declined comment.
According to court records, the owners submitted a non-eviction offering plan to state Attorney General Andrew Cuomo in February 2006. Under a non-eviction plan, tenants cannot be evicted for failure to buy their apartments, and must be allowed to continue as rent-paying tenants, according to the attorney general's website.
Judge Marc Finkelstein denied a motion to dismiss the case on March 23. By the end of March, Cuomo's office approved the non-eviction plan to convert Manhattan House from a rental building to a condominium.
However, a long-running dispute between the owners Jeremiah O'Connor and Richard Kalikow delayed the conversion until October, when O'Connor bought out Kalikow and secured $750 million in financing from Germany-based HSH Nordbank AG to continue the conversion.
Cohen ruled that the landlord could not justify an eviction because there were no other qualifying causes, such as failure to pay rent or failure to grant access to the apartment.
"Here, the only basis for the eviction of these tenants is the fact that their lease terms have expired and have not been renewed," Cohen wrote. "Consequently, respondents are protected from 'no cause' holdover eviction proceedings by the Martin Act."
The ruling echoes a similar decision by Cohen in March, when he dismissed eviction proceedings against 23-market rate tenants at Sheffield57 (formerly The Sheffield), on West 57th Street.
"If it's upheld by the appellate court, it certainly will have a significant impact on the rights of landlords to come into a building with a significant amount of market-rate tenants and simply clear the building out and evict them," said Kevin McConnell, the lawyer for tenants in both the Manhattan House and Sheffield cases.
David Jones, The Real Deal
A housing court judge has dismissed eviction proceedings against a group of tenants at the famed Manhattan House building on the Upper East Side, a decision that could set back one of the biggest condo conversions in the city's history.
Manhattan House tenants had argued that after the new owners bought the luxury rental complex for a record $625 million in 2005, they failed to renew the leases of hundreds of tenants. Lawyers also argued that the new owners offered bogus renewal leases for at least 11 tenants by asking for excessive rent hikes or lease terms of less than six months.
"The lease offerings were at exorbitant rates that were designed to intimidate and demean us," said Dr. Douglas Altchek, a long-time Manhattan House resident and a plaintiff in the case. "I was never offered a lease, but was told to get out 12 days after my lease expired."
In late October, Manhattan House put more than 70 apartments on sale, with some listing for more than $6 million. The building has 196 rent-stabilized tenants, 58 market rate tenants, 327 vacant apartments and a resident manager, according to the Manhattan House Tenants Group. A total of 31 units have been renovated.
Judge David Cohen ruled on Nov. 28 that the 31 market-rate tenants at the landmark apartment complex were protected from eviction under the Martin Act, a state law that regulates the conversion of residential rental buildings into condominiums. The tenants' attorneys learned of the decision today.
Manhattan House officials declined comment.
According to court records, the owners submitted a non-eviction offering plan to state Attorney General Andrew Cuomo in February 2006. Under a non-eviction plan, tenants cannot be evicted for failure to buy their apartments, and must be allowed to continue as rent-paying tenants, according to the attorney general's website.
Judge Marc Finkelstein denied a motion to dismiss the case on March 23. By the end of March, Cuomo's office approved the non-eviction plan to convert Manhattan House from a rental building to a condominium.
However, a long-running dispute between the owners Jeremiah O'Connor and Richard Kalikow delayed the conversion until October, when O'Connor bought out Kalikow and secured $750 million in financing from Germany-based HSH Nordbank AG to continue the conversion.
Cohen ruled that the landlord could not justify an eviction because there were no other qualifying causes, such as failure to pay rent or failure to grant access to the apartment.
"Here, the only basis for the eviction of these tenants is the fact that their lease terms have expired and have not been renewed," Cohen wrote. "Consequently, respondents are protected from 'no cause' holdover eviction proceedings by the Martin Act."
The ruling echoes a similar decision by Cohen in March, when he dismissed eviction proceedings against 23-market rate tenants at Sheffield57 (formerly The Sheffield), on West 57th Street.
"If it's upheld by the appellate court, it certainly will have a significant impact on the rights of landlords to come into a building with a significant amount of market-rate tenants and simply clear the building out and evict them," said Kevin McConnell, the lawyer for tenants in both the Manhattan House and Sheffield cases.
Monday, December 03, 2007
Judge rules in favor of Manhattan House market tenants
Judge Cohen by decision dated November 28, 2007 dismissed the holdover proceedings against the tenants.
Read the full decision here
Read the full decision here
Tuesday, October 30, 2007
Manhattan House Landmarked Today
The Landmarks Preservation Commission voted today to landmark Manhattan House at 200 East 66th Street. An excerpt from the Commission's statement is below:
Manhattan House, 200 East 66 Street
Manhattan House, the sprawling full-block, modernist white-brick icon on Manhattan’s Upper East Side, attracted such renowned tenants as actress Grace Kelly and jazz clarinetist Benny Goodman. Set between a block-long garden and two driveways, the 21-story, 10-tower structure elevated white brick as a fashionable building material and popularized balconies, green spaces and driveways in many new residential high rises constructed in New York City after World War II.
“Manhattan House set a new standard for apartment construction in New York City and gave modernism a strong foothold here,” said Commissioner Tierney. “Although Manhattan House inspired many new architectural imitators, very few came close to what it achieved. It joins a growing list of modern landmarks we’ve designated since 2002, such as the Summit Hotel and Socony-Mobil building.”
The New York Life Insurance Company commissioned the New York office of Skidmore, Owings & Merrill, the Chicago-based firm that was at the forefront of the development of modern architecture in the United States, to design Manhattan House. Completed in 1951 and occupying a block between 65th and 66th streets and Second and Third avenues, the building reflects the theories of Le Corbusier, the renowned 20th century French architect who was known for setting enormous, slab-like apartment buildings in open spaces.
In addition to Grace Kelly and Benny Goodman, some of the Manhattan House’s tenants included such design luminaries as George Bunshaft, the lead architect of the building for Skidmore, Owings &Merrill; Elizabeth Potts, founder of the American Institute of Interior Designers; and furniture designer Florence Knoll. Actress Grace Kelly lived there for a brief period in the early 1950s, as did jazz clarinetist Benny Goodman, who died in his apartment in 1986. Former New York State Governor Hugh Carey and Frank Hardart, co-founder of the Automat restaurant chain, also lived in Manhattan House.
Manhattan House, 200 East 66 Street
Manhattan House, the sprawling full-block, modernist white-brick icon on Manhattan’s Upper East Side, attracted such renowned tenants as actress Grace Kelly and jazz clarinetist Benny Goodman. Set between a block-long garden and two driveways, the 21-story, 10-tower structure elevated white brick as a fashionable building material and popularized balconies, green spaces and driveways in many new residential high rises constructed in New York City after World War II.
“Manhattan House set a new standard for apartment construction in New York City and gave modernism a strong foothold here,” said Commissioner Tierney. “Although Manhattan House inspired many new architectural imitators, very few came close to what it achieved. It joins a growing list of modern landmarks we’ve designated since 2002, such as the Summit Hotel and Socony-Mobil building.”
The New York Life Insurance Company commissioned the New York office of Skidmore, Owings & Merrill, the Chicago-based firm that was at the forefront of the development of modern architecture in the United States, to design Manhattan House. Completed in 1951 and occupying a block between 65th and 66th streets and Second and Third avenues, the building reflects the theories of Le Corbusier, the renowned 20th century French architect who was known for setting enormous, slab-like apartment buildings in open spaces.
In addition to Grace Kelly and Benny Goodman, some of the Manhattan House’s tenants included such design luminaries as George Bunshaft, the lead architect of the building for Skidmore, Owings &Merrill; Elizabeth Potts, founder of the American Institute of Interior Designers; and furniture designer Florence Knoll. Actress Grace Kelly lived there for a brief period in the early 1950s, as did jazz clarinetist Benny Goodman, who died in his apartment in 1986. Former New York State Governor Hugh Carey and Frank Hardart, co-founder of the Automat restaurant chain, also lived in Manhattan House.
The Kelly Connection
October 28, 2007
Big Deal, Josh Barbanel, New York Times
IS the story of Grace Kelly, the future princess, at the Manhattan House, a quintessential Manhattan real estate story?
That is the question that Dr. Jim Sperber, an internist in San Juan Capistrano, Calif., who is also a Grace Kelly fan and the son of a Prudential Douglas Elliman broker, raised in an e-mail message about her stay in the early 1950s at Manhattan House, the first and perhaps grandest white-brick apartment complex on the Upper East Side.
Now that Manhattan House — with 584 apartments, many with balconies, spread across five 20-story towers — is in the midst of a condominium conversion, the sponsors are celebrating Grace Kelly’s years there and have signed an agreement with the Princess Grace Foundation, to permit the use of her image in promotional materials.
But after learning of this development, Dr. Sperber, who has many interests, including providing medical care to an 8-foot 4-inch farmer in Ukraine, went through his collection of Grace Kelly books — assembled from garage sales — and pointed out that Miss Kelly’s father, John B. Kelly Sr., a three-time American gold medalist rower, helped build the Manhattan House.
Mr. Kelly, a wealthy Philadelphia contractor from an Irish family, who ran an unsuccessful campaign for mayor of Philadelphia in the 1930s, founded Kelly for Brickwork, which was a subcontractor on the project. Many Manhattan House residents believe that his company manufactured the distinctive white bricks used on the building, but Toby E. Boshak, the executive director of the Princess Grace Foundation, said that his firm was hired as a construction contractor to do the brick work and put up the distinctive white walls of the project.
As for the notion that he used his pull, as any father might, to get his daughter into a coveted apartment in the building, the evidence is far from certain. On the one hand, biographies detail a difficult relationship that Grace Kelly had with her father, and she yearned for financial independence from her family. On the other hand, family background was carefully reviewed at the Manhattan House and other prominent buildings in Manhattan.
Patricia Lynch, a former television news investigative producer for NBC Nightly News, who has lived in Manhattan House since 1975, said that when she applied for admission 25 years after Grace Kelly moved in, the building had a long waiting list and connections were needed to get to the top of the list. She said that she wore white gloves for an interview in which the building manager queried her about her parents and her family background, even though she had written two books and was financially independent at the time.
One biography, “Grace,” by Robert Lacey (Putnam Adult, 1994), said that Miss Kelly, who was in her early 20s, was “installed” there by her father in an apartment that her mother decorated. Another book, “The Bridesmaids,” by Judith Balaban Quine (Weidenfeld & Nicolson, 1989), who was a bridesmaid at her wedding to Prince Rainier in Monaco, said that the Kellys had given their daughter “permission” to leave the Barbizon Hotel and move into Manhattan House, but wanted her to find a roommate. The book also suggested that the apartment was decorated to the taste of Miss Kelly’s mother, Margaret.
In an interview, her first Manhattan House roommate and another bridesmaid, Sally Parrish Richardson, said that she moved in after Miss Kelly and did not know how she got the apartment.
The Manhattan House sponsors have commissioned four designers to create model apartments “with the spirit of Princess Grace,” bringing their “unique vision of grand, high-style living at Manhattan House.”
But by some accounts, despite her increasingly glamorous life, Grace Kelly’s furnishings at Manhattan House were, alas, quite plain. “The living room was without charm, character or gender,” Ms. Quine wrote. “It wasn’t ugly; it was utterly bland. Furniture, fabrics and colors alike were all resolutely practical. Everything seemed brown.”
Big Deal, Josh Barbanel, New York Times
IS the story of Grace Kelly, the future princess, at the Manhattan House, a quintessential Manhattan real estate story?
That is the question that Dr. Jim Sperber, an internist in San Juan Capistrano, Calif., who is also a Grace Kelly fan and the son of a Prudential Douglas Elliman broker, raised in an e-mail message about her stay in the early 1950s at Manhattan House, the first and perhaps grandest white-brick apartment complex on the Upper East Side.
Now that Manhattan House — with 584 apartments, many with balconies, spread across five 20-story towers — is in the midst of a condominium conversion, the sponsors are celebrating Grace Kelly’s years there and have signed an agreement with the Princess Grace Foundation, to permit the use of her image in promotional materials.
But after learning of this development, Dr. Sperber, who has many interests, including providing medical care to an 8-foot 4-inch farmer in Ukraine, went through his collection of Grace Kelly books — assembled from garage sales — and pointed out that Miss Kelly’s father, John B. Kelly Sr., a three-time American gold medalist rower, helped build the Manhattan House.
Mr. Kelly, a wealthy Philadelphia contractor from an Irish family, who ran an unsuccessful campaign for mayor of Philadelphia in the 1930s, founded Kelly for Brickwork, which was a subcontractor on the project. Many Manhattan House residents believe that his company manufactured the distinctive white bricks used on the building, but Toby E. Boshak, the executive director of the Princess Grace Foundation, said that his firm was hired as a construction contractor to do the brick work and put up the distinctive white walls of the project.
As for the notion that he used his pull, as any father might, to get his daughter into a coveted apartment in the building, the evidence is far from certain. On the one hand, biographies detail a difficult relationship that Grace Kelly had with her father, and she yearned for financial independence from her family. On the other hand, family background was carefully reviewed at the Manhattan House and other prominent buildings in Manhattan.
Patricia Lynch, a former television news investigative producer for NBC Nightly News, who has lived in Manhattan House since 1975, said that when she applied for admission 25 years after Grace Kelly moved in, the building had a long waiting list and connections were needed to get to the top of the list. She said that she wore white gloves for an interview in which the building manager queried her about her parents and her family background, even though she had written two books and was financially independent at the time.
One biography, “Grace,” by Robert Lacey (Putnam Adult, 1994), said that Miss Kelly, who was in her early 20s, was “installed” there by her father in an apartment that her mother decorated. Another book, “The Bridesmaids,” by Judith Balaban Quine (Weidenfeld & Nicolson, 1989), who was a bridesmaid at her wedding to Prince Rainier in Monaco, said that the Kellys had given their daughter “permission” to leave the Barbizon Hotel and move into Manhattan House, but wanted her to find a roommate. The book also suggested that the apartment was decorated to the taste of Miss Kelly’s mother, Margaret.
In an interview, her first Manhattan House roommate and another bridesmaid, Sally Parrish Richardson, said that she moved in after Miss Kelly and did not know how she got the apartment.
The Manhattan House sponsors have commissioned four designers to create model apartments “with the spirit of Princess Grace,” bringing their “unique vision of grand, high-style living at Manhattan House.”
But by some accounts, despite her increasingly glamorous life, Grace Kelly’s furnishings at Manhattan House were, alas, quite plain. “The living room was without charm, character or gender,” Ms. Quine wrote. “It wasn’t ugly; it was utterly bland. Furniture, fabrics and colors alike were all resolutely practical. Everything seemed brown.”
Saturday, October 20, 2007
Evoking the Memory of a Style Icon
October 21, 2007
By Josh Barbanel, Big Deal, New York Times
What comes to mind when you think of the Manhattan House, the first and perhaps the grandest postwar white-brick apartment house in Manhattan? The magic of Grace Kelly, maybe? Or a brutish battle over a condominium conversion, with tenants warring with the sponsors and the sponsors fighting with each other?
But now the dispute between the building owners has been settled; the project has been refinanced; and prices on many apartments, especially those of existing tenants, have been cut. A new marketing campaign is trying to shift attention to glamour and to Grace Kelly, who lived there in the early 1950s.
Manhattan House, built in 1950, fills a full city block at 66th Street and Third Avenue, with five 20-story towers, 584 units and large gardens. It also has several hundred tenants, some of whom have been fighting the conversion in state court and others complaining that elderly market-rate tenants were being forced out.
The project, which would be the largest Manhattan condo conversion ever, valued at more than $1.1 billion if completed, faced extensive delays, expiring financing and a dispute between two partners: Jeremiah W. O’Connor Jr., who provided most of the capital, and N. Richard Kalikow, who managed the project.
But two weeks ago, Mr. O’Connor settled the lawsuit, obtained full control of the project and signed up for new financing, an amendment to the offering plan said. Court records did not indicate the terms of the settlement, and neither Mr. O’Connor nor Mr. Kalikow would discuss them.
Under the conditions set in his financing, Mr. O’Connor promised to find buyers for 15 percent, or about 88, of the 584 apartments, and obtain the approval of the attorney general to put the plan into effect by next June 1.
Within days of taking control, Mr. O’Connor held a party in a newly renovated rooftop library and club space; several hundred tenants attended. He announced that the insider discount for tenants had been doubled, to 15 percent, for those who buy within 30 days. Prices were cut by 6.6 percent over all, according to the amendment. But Brett Buehrer, a vice president at O’Connor Capital Partners, said that the decreases were aimed mainly at occupied apartments.
Grace Kelly, who become Princess Grace of Monaco, lived at the Manhattan House while pursuing an acting career. She also lived at the Barbizon Hotel, which was recently converted into a condominium, Barbizon/63, with a marking campaign that also mentioned her, along with other notable actresses who lived there.
At the Manhattan House, the developers are a sponsor of an ongoing exhibit of Grace Kelly memorabilia. It was timed to the 25th anniversary of her death, on Sept. 14, 1982, and an auction of a gown and a dress suit worn by Ms. Kelly will be held to raise money for the Princess Grace Foundation.
Dolly Lenz, a broker at Prudential Douglas Elliman who is heading marketing at the project, said that four designers had been commissioned to create apartments “inspired by Princess Grace.” They are Alexa Hampton, Jamie Drake, Campion Platt and Maureen Footer.
Asking prices on one-bedrooms with terraces start just over $1 million. A tenant lawsuit seeking to stop the conversion is still pending, but the court allowed the sponsor to continue its sales program.
Monday, October 15, 2007
June 1, 2008 Deadline for Manhattan House, O'Connor
The terms of O'Connor's loan to purchase Manhattan House give him only until June 1, 2008 to sell 15% of the units in the building, according to a filing last week with the New York State Attorney General's office.
The Second Amendment to the Manhattan House Condominium Offering Plan was filed October 11, 2007.
The Second Amendment to the Manhattan House Condominium Offering Plan was filed October 11, 2007.
With Financing Completed, $1B Condo Conversion to Move Forward in NYC
By Kelly Sheehan, Online News Editor
Multi-Housing News
October 12, 2007
New York—O’Connor Capital Partners, a privately held real estate investment and development firm, has closed on $750 million of senior financing from HSH Nordbank AG, a commercial bank headquartered in Hamburg/Kiel, Germany. The firm will use the money for a luxury condo conversion project in New York City.
The financing follows a decision by O’Connor to buy out its previous partner and assume full control. The complex was purchased last year for $620 million--the largest residential sale in history, only behind Stuyvesant Town and Peter Cooper Village.
O’Connor plans to invest a total of $1 billion converting Manhattan House, previously an apartment community, into a condo complex. The building is famous for its light-colored façade, thought to be the building that started the craze of white-brick buildings in the city. At one time, actress Grace Kelly also rented an apartment at Manhattan House, which is located at 200 East 66t St. on the city’s Upper East Side.
Jerry O’Connor, managing partner of O’Connor Capital Partners, says that Manhattan House will feature the amenities of new construction with the charm of the building’s original architecture. Originally designed by Gordon Bunshaft of Skidmore, Owings & Merill in 1952, the building will be restored by SOM and Randall Ridless.
O’Connor Capital Partners’ capital improvements to the property will include common amenities such as a rooftop club with Sasaki-designed garden, spa and fitness center; indoor playroom and outdoor play area designed by Roto Studio; concierge services; and valet parking services.
Multi-Housing News
October 12, 2007
New York—O’Connor Capital Partners, a privately held real estate investment and development firm, has closed on $750 million of senior financing from HSH Nordbank AG, a commercial bank headquartered in Hamburg/Kiel, Germany. The firm will use the money for a luxury condo conversion project in New York City.
The financing follows a decision by O’Connor to buy out its previous partner and assume full control. The complex was purchased last year for $620 million--the largest residential sale in history, only behind Stuyvesant Town and Peter Cooper Village.
O’Connor plans to invest a total of $1 billion converting Manhattan House, previously an apartment community, into a condo complex. The building is famous for its light-colored façade, thought to be the building that started the craze of white-brick buildings in the city. At one time, actress Grace Kelly also rented an apartment at Manhattan House, which is located at 200 East 66t St. on the city’s Upper East Side.
Jerry O’Connor, managing partner of O’Connor Capital Partners, says that Manhattan House will feature the amenities of new construction with the charm of the building’s original architecture. Originally designed by Gordon Bunshaft of Skidmore, Owings & Merill in 1952, the building will be restored by SOM and Randall Ridless.
O’Connor Capital Partners’ capital improvements to the property will include common amenities such as a rooftop club with Sasaki-designed garden, spa and fitness center; indoor playroom and outdoor play area designed by Roto Studio; concierge services; and valet parking services.
Friday, September 28, 2007
Manhattan House condo loan meets market resistance
Syndication of Condo-Conversion Loan Lags
Commercial Mortgage Alert
September 28, 2007
HSH Nordbank is struggling to syndicate a $700 million floating-rate loan it originated for the recapitalization of the troubled Manhattan House condo-conversion project.
The German bank plans to retain the roughly $300 million subordinate portion and sell the rest, according to market players. But while Bank of America has agreed to take down $100 million of the senior portion, HSH has not yet been able to place the balance.
Some lenders, like Metropolitan Life, are still studying the loan. Others, like Calyon, have decided to bypass it, put off by a legal dispute between the owners, opposition from angry tenants and the general market uncertainty.
"I actually like the property," said one lender. "It’s got great potential. But with everything else hanging over it, I don’t know."
"This is a very illiquid environment," another banker said. "It’s a tough time to be in the market with something like this."
HSH’s loan was part of a restructuring last month that allowed Jeremiah O’Connor of O’Connor Capital Partners to buy out his partner, New York developer Richard Kalikow.
The duo purchased the tony property in 2005 from New York Life for $625 million, with the goal of converting the 583 apartments into condominiums.
But O’Connor and Kalikow fought over the management of the conversion, leading to a lawsuit. In June, a New York State Supreme Court judge ruled that one partner would have to buy the other out to resolve the dispute.
At first, Kalikow agreed to buy out O’Connor. But then, on Aug. 1, Kalikow announced that O’Connor would buy him out instead. Last month, Kalikow filed a lawsuit accusing O’Connor and condominium-sales broker Prudential Douglas Elliman of colluding to undermine his position in the deal and seize control of the project.
The Manhattan House complex consists of five linked towers, each with its own elevator bank, driveway and private street-level gardens. The property sits on a full block between East 65th and East 66th Streets, stretching from Second to Third Avenues.
Kalikow and O’Connor financed their acquisition and part of the conversion with a $672 million loan from Credit Suisse and Lehman Brothers. The $450 million senior portion was securitized via a $2 billion pooled offering (Credit Suisse First Boston Mortgage Securities Corp., 2005-CND2) that was one of the first CMBS issues backed solely by condo-conversion loans.
Tenants attempting to block the conversion last year complained to the state attorney general that the information disclosed to investors in the securitization should have been withheld until the release of a preliminary prospectus for the condo sales. They have also accused the owners of harassing tenants in the approximately 250 rent-stabilized units.
Renovations to the first 30 units began earlier this year. The conversion will encompass everything from studios to four- and possibly five-bedroom condos, with the top-floor units reserved as penthouses.
Units will range in size from 600 sf to 2,400 sf. In response to demand for larger units, some apartments could be combined to create units of up to 3,600 sf.
Commercial Mortgage Alert
September 28, 2007
HSH Nordbank is struggling to syndicate a $700 million floating-rate loan it originated for the recapitalization of the troubled Manhattan House condo-conversion project.
The German bank plans to retain the roughly $300 million subordinate portion and sell the rest, according to market players. But while Bank of America has agreed to take down $100 million of the senior portion, HSH has not yet been able to place the balance.
Some lenders, like Metropolitan Life, are still studying the loan. Others, like Calyon, have decided to bypass it, put off by a legal dispute between the owners, opposition from angry tenants and the general market uncertainty.
"I actually like the property," said one lender. "It’s got great potential. But with everything else hanging over it, I don’t know."
"This is a very illiquid environment," another banker said. "It’s a tough time to be in the market with something like this."
HSH’s loan was part of a restructuring last month that allowed Jeremiah O’Connor of O’Connor Capital Partners to buy out his partner, New York developer Richard Kalikow.
The duo purchased the tony property in 2005 from New York Life for $625 million, with the goal of converting the 583 apartments into condominiums.
But O’Connor and Kalikow fought over the management of the conversion, leading to a lawsuit. In June, a New York State Supreme Court judge ruled that one partner would have to buy the other out to resolve the dispute.
At first, Kalikow agreed to buy out O’Connor. But then, on Aug. 1, Kalikow announced that O’Connor would buy him out instead. Last month, Kalikow filed a lawsuit accusing O’Connor and condominium-sales broker Prudential Douglas Elliman of colluding to undermine his position in the deal and seize control of the project.
The Manhattan House complex consists of five linked towers, each with its own elevator bank, driveway and private street-level gardens. The property sits on a full block between East 65th and East 66th Streets, stretching from Second to Third Avenues.
Kalikow and O’Connor financed their acquisition and part of the conversion with a $672 million loan from Credit Suisse and Lehman Brothers. The $450 million senior portion was securitized via a $2 billion pooled offering (Credit Suisse First Boston Mortgage Securities Corp., 2005-CND2) that was one of the first CMBS issues backed solely by condo-conversion loans.
Tenants attempting to block the conversion last year complained to the state attorney general that the information disclosed to investors in the securitization should have been withheld until the release of a preliminary prospectus for the condo sales. They have also accused the owners of harassing tenants in the approximately 250 rent-stabilized units.
Renovations to the first 30 units began earlier this year. The conversion will encompass everything from studios to four- and possibly five-bedroom condos, with the top-floor units reserved as penthouses.
Units will range in size from 600 sf to 2,400 sf. In response to demand for larger units, some apartments could be combined to create units of up to 3,600 sf.
Friday, August 24, 2007
Manhattan House Fight Escalates
By Josh Barbanel
August 26, 2007, New York Times
The huge $1.1 billion redevelopment of the Manhattan House on East 66th Street was to be the biggest condo conversion deal ever for Prudential Douglas Elliman and its best-selling broker, Dolly Lenz.
But with the project stalled by a tenant lawsuit and a fight for control between the sponsors, it may soon become a potential liability for Prudential Douglas Elliman, Manhattan’s largest brokerage.
In a court filing last week, N. Richard Kalikow, a developer who is the project’s managing partner, accused Douglas Elliman of colluding with his financial partner, Jeremiah W. O’Connor Jr., to wrest control away from him, sabotaging the project. Ms. Lenz was the lead broker in the deal.
In the filing last week in State Supreme Court in Manhattan, Mr. Kalikow asked the court to allow him to amend his complaint to include Prudential Douglas Elliman as a defendant in the case and to seek $75 million in damages as well as punitive damages against the company.
Mr. Kalikow said in the filing that he had discovered that although he was in charge of day-to-day operations, Ms. Lenz and other Douglas Elliman staff members held a series of secret weekly meetings with Mr. O’Connor’s team, reviewing plans and making decisions behind his back.
Stanley S. Arkin, a partner in Arkin Kaplan Rice, the law firm that represents Douglas Elliman, said the filing was an “unjustified, dishonest lawsuit, a shakedown designed to bring some kind of pressure to bear.”
He said that the meetings were “not clandestine” and that they were held because Mr. Kalikow “was not performing well” and Mr. O’Connor was “probably complaining.”
The dispute led to what seemed to be a showdown between the partners earlier this spring, soon after the attorney general approved the project’s offering plan. Under their agreement, Mr. O’Connor set a price for the project and gave Mr. Kalikow a chance to buy him out or be bought out.
Mr. Kalikow tried to put together a financing package to buy out Mr. O’Connor but was unable to complete the purchase. He contended that Mr. O’Connor scared away his financial backers by threatening an escalation of the legal dispute. Now Mr. O’Connor is asking the court to let him complete the purchase, while Mr. Kalikow is raising new legal issues.
August 26, 2007, New York Times
The huge $1.1 billion redevelopment of the Manhattan House on East 66th Street was to be the biggest condo conversion deal ever for Prudential Douglas Elliman and its best-selling broker, Dolly Lenz.
But with the project stalled by a tenant lawsuit and a fight for control between the sponsors, it may soon become a potential liability for Prudential Douglas Elliman, Manhattan’s largest brokerage.
In a court filing last week, N. Richard Kalikow, a developer who is the project’s managing partner, accused Douglas Elliman of colluding with his financial partner, Jeremiah W. O’Connor Jr., to wrest control away from him, sabotaging the project. Ms. Lenz was the lead broker in the deal.
In the filing last week in State Supreme Court in Manhattan, Mr. Kalikow asked the court to allow him to amend his complaint to include Prudential Douglas Elliman as a defendant in the case and to seek $75 million in damages as well as punitive damages against the company.
Mr. Kalikow said in the filing that he had discovered that although he was in charge of day-to-day operations, Ms. Lenz and other Douglas Elliman staff members held a series of secret weekly meetings with Mr. O’Connor’s team, reviewing plans and making decisions behind his back.
Stanley S. Arkin, a partner in Arkin Kaplan Rice, the law firm that represents Douglas Elliman, said the filing was an “unjustified, dishonest lawsuit, a shakedown designed to bring some kind of pressure to bear.”
He said that the meetings were “not clandestine” and that they were held because Mr. Kalikow “was not performing well” and Mr. O’Connor was “probably complaining.”
The dispute led to what seemed to be a showdown between the partners earlier this spring, soon after the attorney general approved the project’s offering plan. Under their agreement, Mr. O’Connor set a price for the project and gave Mr. Kalikow a chance to buy him out or be bought out.
Mr. Kalikow tried to put together a financing package to buy out Mr. O’Connor but was unable to complete the purchase. He contended that Mr. O’Connor scared away his financial backers by threatening an escalation of the legal dispute. Now Mr. O’Connor is asking the court to let him complete the purchase, while Mr. Kalikow is raising new legal issues.
Tuesday, August 21, 2007
Well is running dry for real estate deals
Real estate lending evaporates, transactions stall and buyers walk.
Tom Fredrickson, Crain's New York Business
August 19, 2007
The credit crunch is paralyzing the New York real estate market.
In the past few weeks, financing for almost all large commercial and residential projects in the city has dried up.
As a result, some property developers and investors are being forced to abandon deals and are losing hundreds of thousands of dollars in deposits. Those who are closing deals are being forced to double their down payments and pay significantly higher interest rates.
"The blood on the streets proved that things go down as well as up," says Geoffrey Rice, a senior director at CB Richard Ellis/Capital Markets. "The markets have just changed."
The credit crunch results from the meltdown in subprime residential loans, which has quashed investor interest in any type of real estate securities. Wall Street banks issue most large loans, which they package into securities and sell to investors. In recent weeks, growing concern about bad real estate loans has brought that activity to a virtual standstill.
With the residential real estate market looking increasingly overbuilt, interest has been particularly weak in financing new condominium developments anywhere except in prime Manhattan locations.
Deals on hold
"Condo developments in fringe locations are soft," says Dan Fasulo, managing director at Real Capital Analytics.
With the securitization pipeline for all sorts of projects closed, 37 commercial deals in Manhattan collectively worth $9.5 billion remain unfunded, according to Real Capital Analytics. They include $1.29 billion to acquire the Park Avenue Atrium office tower; $1.2 billion for the Manhattan House apartment complex; and about $53 million to buy an industrial property at 511 W. 21st St., demolish it and put up a hotel. These transactions may still be done, however.
In the past month, such Wall Street firms as Goldman Sachs, Lehman Brothers and Bear Stearns, as well as money-center banks like Citigroup and J.P. Morgan Chase, have drastically reduced the number of deals they are willing to finance.
"We are finding it almost impossible to get a real quote or anything that will stick," says James Murphy, executive managing director, New York metropolitan region, at real estate brokerage GVA Williams.
Deposits at risk
Several sources say they know of cases in which investors are losing deposits because they can't find financing. The chief hurdle most of them failed to clear was the additional equity that lenders are requiring. Buyers could lose many millions of dollars in the next several weeks as the 30- and 60-day closing deadlines--typical in New York--arrive.
One Brooklyn investor who borrows on Wall Street says that in recent weeks he has walked away from acquiring about eight office building and shopping centers collectively worth $150 million.
One of those deals required a $500,000 deposit, which is now lost. The buyer thought he had locked in an interest-only mortgage at 6%, but his lender changed the terms, making the loan 7% and requiring monthly principal payments. The monthly cash outlay for the latter loan would have been 37% higher than that for the former, the investor says. "I would have ended up making no money."
About the only transactions moving ahead are smaller ones financed by savings banks and insurers; those lenders will not sell mortgages in the secondary market but hold them in their own portfolios.
In the past two weeks, New York Life has begun processing $200 million of commercial real estate loans nationally. Manhattan-based Amalgamated Bank, which caps its mortgages at about $25 million, is hiring commercial lenders and aims to increase its commercial loan portfolio to $1 billion from $600 million.
"We view the current disruption in the marketplace as a short- and intermediate-term opportunity," says Amalgamated Chief Executive Derrick Cephas.
Wall Street is altering terms on the few loans it is completing. Lenders cite contract provisions that allow such revisions in response to "material adverse changes"--namely, the freeze-up in the debt markets. The result is that interest rates on commercial mortgages in the pipeline are now a full percentage point higher than 10-year Treasury notes. Lenders are also demanding equity contributions of 30% or more, compared with only 10% or 15% before the credit crunch.
With so much uncertainty, some sellers are lowering prices to help make deals happen. Mr. Murphy at GVA Williams says prices for office buildings under contract for $100 million are being slashed by up to 6%.
"Prices are down 5% to 10% on all purchases," says Ira Zlotowitz, president of Eastern Union Funding, a Brooklyn-based commercial mortgage brokerage. "No one thinks prices are going to go up."
Tom Fredrickson, Crain's New York Business
August 19, 2007
The credit crunch is paralyzing the New York real estate market.
In the past few weeks, financing for almost all large commercial and residential projects in the city has dried up.
As a result, some property developers and investors are being forced to abandon deals and are losing hundreds of thousands of dollars in deposits. Those who are closing deals are being forced to double their down payments and pay significantly higher interest rates.
"The blood on the streets proved that things go down as well as up," says Geoffrey Rice, a senior director at CB Richard Ellis/Capital Markets. "The markets have just changed."
The credit crunch results from the meltdown in subprime residential loans, which has quashed investor interest in any type of real estate securities. Wall Street banks issue most large loans, which they package into securities and sell to investors. In recent weeks, growing concern about bad real estate loans has brought that activity to a virtual standstill.
With the residential real estate market looking increasingly overbuilt, interest has been particularly weak in financing new condominium developments anywhere except in prime Manhattan locations.
Deals on hold
"Condo developments in fringe locations are soft," says Dan Fasulo, managing director at Real Capital Analytics.
With the securitization pipeline for all sorts of projects closed, 37 commercial deals in Manhattan collectively worth $9.5 billion remain unfunded, according to Real Capital Analytics. They include $1.29 billion to acquire the Park Avenue Atrium office tower; $1.2 billion for the Manhattan House apartment complex; and about $53 million to buy an industrial property at 511 W. 21st St., demolish it and put up a hotel. These transactions may still be done, however.
In the past month, such Wall Street firms as Goldman Sachs, Lehman Brothers and Bear Stearns, as well as money-center banks like Citigroup and J.P. Morgan Chase, have drastically reduced the number of deals they are willing to finance.
"We are finding it almost impossible to get a real quote or anything that will stick," says James Murphy, executive managing director, New York metropolitan region, at real estate brokerage GVA Williams.
Deposits at risk
Several sources say they know of cases in which investors are losing deposits because they can't find financing. The chief hurdle most of them failed to clear was the additional equity that lenders are requiring. Buyers could lose many millions of dollars in the next several weeks as the 30- and 60-day closing deadlines--typical in New York--arrive.
One Brooklyn investor who borrows on Wall Street says that in recent weeks he has walked away from acquiring about eight office building and shopping centers collectively worth $150 million.
One of those deals required a $500,000 deposit, which is now lost. The buyer thought he had locked in an interest-only mortgage at 6%, but his lender changed the terms, making the loan 7% and requiring monthly principal payments. The monthly cash outlay for the latter loan would have been 37% higher than that for the former, the investor says. "I would have ended up making no money."
About the only transactions moving ahead are smaller ones financed by savings banks and insurers; those lenders will not sell mortgages in the secondary market but hold them in their own portfolios.
In the past two weeks, New York Life has begun processing $200 million of commercial real estate loans nationally. Manhattan-based Amalgamated Bank, which caps its mortgages at about $25 million, is hiring commercial lenders and aims to increase its commercial loan portfolio to $1 billion from $600 million.
"We view the current disruption in the marketplace as a short- and intermediate-term opportunity," says Amalgamated Chief Executive Derrick Cephas.
Wall Street is altering terms on the few loans it is completing. Lenders cite contract provisions that allow such revisions in response to "material adverse changes"--namely, the freeze-up in the debt markets. The result is that interest rates on commercial mortgages in the pipeline are now a full percentage point higher than 10-year Treasury notes. Lenders are also demanding equity contributions of 30% or more, compared with only 10% or 15% before the credit crunch.
With so much uncertainty, some sellers are lowering prices to help make deals happen. Mr. Murphy at GVA Williams says prices for office buildings under contract for $100 million are being slashed by up to 6%.
"Prices are down 5% to 10% on all purchases," says Ira Zlotowitz, president of Eastern Union Funding, a Brooklyn-based commercial mortgage brokerage. "No one thinks prices are going to go up."
Thursday, August 16, 2007
Manhattan House Bonds Downgraded to Junk; Loan Transferred to "Special Servicing"
August 16, 2007 11:06 AM Eastern Daylight Time
Fitch Downgrades 1 & Places 2 Classes of CSFB 2005-CND2 on Rating Watch Negative
CHICAGO--(BUSINESS WIRE)--Fitch Ratings downgrades the following class of Credit Suisse First Boston's (CSFB) commercial mortgage pass-through certificates, series 2005-CND2:
--$18.8 million class N to 'B-' from 'BB-'.
Fitch places the following classes on Rating Watch Negative (RWN):
--$32 million class L rated 'BBB-';
--$23 million class M rated 'BB'.
In addition, Fitch affirms the following classes:
--$327.5 million class A-2 at 'AAA';
--Interest-only class A-X-1 at 'AAA';
--Interest-only class A-X-2 at 'AAA';
--Interest-only class A-X-3 at 'AAA';
--Interest-only class A-X-4 at 'AAA';
--Interest-only class A-X-5 at 'AAA';
--Interest-only class A-Y at 'AAA';
--$64 million class B at 'AAA';
--$63 million class C at 'AA';
--$39 million class D at 'AA';
--$36 million class E at 'AA-';
--$35 million class F at 'A+';
--$37 million class G at 'A';
--$33 million class H at 'A-';
--$36 million class J at BBB+';
--$32 million class K at 'BBB'.
Classes A-1, A-1S, and A-1J have been paid in full.
The downgrade of class N and placement of classes L and M on RWN are due to concerns about fees resulting from the transfer of the largest loan, Manhattan House (58%), to special servicing as well as concerns about the transaction's remaining loans, two (8.9%) of which have matured and remain in the trust.
As of the August 2007 remittance date, the transaction's principal balance had decreased by 61% to $776.3 million from $1.9 billion at issuance. Six loans remain in the pool: Manhattan House (58%), River Terrace (24.3%), Mizner Court at Broken Sound (7.4%), Spring Harbor (4.9%), Spring Landing (4.0%), and 80 John Street (1.4%).
The Manhattan House loan has been transferred to special servicing due to an unresolved buy-out dispute between the partners as well as resident-initiated litigation. There have been no sales or contracts signed for any of the units. The loan matures on Nov. 9, 2007. The loan, which has a trust balance of $450 million and additional subordinate debt of $306 million, is secured by a 583-unit multifamily rental building located on the Upper East Side of Manhattan, New York.
At issuance, the Prestige Portfolio loan was secured by five rental apartment properties (Spring Harbor, Tuscany Place, Spring Landing, Florida Club, and Summer Cove) in four different Florida cities with a total of 1,296 units that initially were to be converted to condominiums. The borrower cancelled the conversion of the rental units into condominiums, and is sold three of the five properties. The two remaining properties, Spring Harbor and Spring Landing, matured on Aug. 9, 2007.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Contacts
Fitch Ratings
Michelle Thomas, +1-312-368-3149
Britt Johnson, +1-312-606-2341
Sandro Scenga, +1-212-908-0278 (Media Relations)
Fitch Downgrades 1 & Places 2 Classes of CSFB 2005-CND2 on Rating Watch Negative
CHICAGO--(BUSINESS WIRE)--Fitch Ratings downgrades the following class of Credit Suisse First Boston's (CSFB) commercial mortgage pass-through certificates, series 2005-CND2:
--$18.8 million class N to 'B-' from 'BB-'.
Fitch places the following classes on Rating Watch Negative (RWN):
--$32 million class L rated 'BBB-';
--$23 million class M rated 'BB'.
In addition, Fitch affirms the following classes:
--$327.5 million class A-2 at 'AAA';
--Interest-only class A-X-1 at 'AAA';
--Interest-only class A-X-2 at 'AAA';
--Interest-only class A-X-3 at 'AAA';
--Interest-only class A-X-4 at 'AAA';
--Interest-only class A-X-5 at 'AAA';
--Interest-only class A-Y at 'AAA';
--$64 million class B at 'AAA';
--$63 million class C at 'AA';
--$39 million class D at 'AA';
--$36 million class E at 'AA-';
--$35 million class F at 'A+';
--$37 million class G at 'A';
--$33 million class H at 'A-';
--$36 million class J at BBB+';
--$32 million class K at 'BBB'.
Classes A-1, A-1S, and A-1J have been paid in full.
The downgrade of class N and placement of classes L and M on RWN are due to concerns about fees resulting from the transfer of the largest loan, Manhattan House (58%), to special servicing as well as concerns about the transaction's remaining loans, two (8.9%) of which have matured and remain in the trust.
As of the August 2007 remittance date, the transaction's principal balance had decreased by 61% to $776.3 million from $1.9 billion at issuance. Six loans remain in the pool: Manhattan House (58%), River Terrace (24.3%), Mizner Court at Broken Sound (7.4%), Spring Harbor (4.9%), Spring Landing (4.0%), and 80 John Street (1.4%).
The Manhattan House loan has been transferred to special servicing due to an unresolved buy-out dispute between the partners as well as resident-initiated litigation. There have been no sales or contracts signed for any of the units. The loan matures on Nov. 9, 2007. The loan, which has a trust balance of $450 million and additional subordinate debt of $306 million, is secured by a 583-unit multifamily rental building located on the Upper East Side of Manhattan, New York.
At issuance, the Prestige Portfolio loan was secured by five rental apartment properties (Spring Harbor, Tuscany Place, Spring Landing, Florida Club, and Summer Cove) in four different Florida cities with a total of 1,296 units that initially were to be converted to condominiums. The borrower cancelled the conversion of the rental units into condominiums, and is sold three of the five properties. The two remaining properties, Spring Harbor and Spring Landing, matured on Aug. 9, 2007.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Contacts
Fitch Ratings
Michelle Thomas, +1-312-368-3149
Britt Johnson, +1-312-606-2341
Sandro Scenga, +1-212-908-0278 (Media Relations)
Kalikow Passes on Manhattan House
By Braden Keil, New York Post
August 2, 2007 -- Developer Richard Kalikow, who sent out a press release two weeks ago proclaiming that he was taking over the city's costliest condo conversion, has just thrown in the towel on the project.
A legal rift between Kalikow and his partner Jeremiah O'Connor over control of the billion-dollar Manhattan House condo conversion prompted a Manhattan Supreme Court judge in June to order the two warring developers to either sell or buy the other out within 30 days.
Occupying a full block on East 65th and 66th streets and Second and Third avenues, Manhattan House, includes 575 rental units that are slated to become luxury condominium apartments as tenants' leases expire.
Kalikow's Alpha Manhattan group sent out a release on July 18 stating that it had received financing from UBS and "has exercised its right to buy out O'Connor North America (ONA) and purchase its interest in Manhattan House."
But late yesterday, Kalikow sent a signed letter to ONA saying: "Alpha will not become the purchasing member pursuant to the Buy-Sell notice."
The letter further stated that "Alpha confirms that ONA will close the acquisition of Alpha's interest in Manhattan House Partners LLC no later [than] August 31, 2007."
"Now that Mr. O'Connor has prevailed, I'm sure the conversion will be an even bigger success," said an exuberant Dolly Lenz, the vice-chairman of Prudential Douglas Elliman, who will be heading the marketing of the pricey project.
August 2, 2007 -- Developer Richard Kalikow, who sent out a press release two weeks ago proclaiming that he was taking over the city's costliest condo conversion, has just thrown in the towel on the project.
A legal rift between Kalikow and his partner Jeremiah O'Connor over control of the billion-dollar Manhattan House condo conversion prompted a Manhattan Supreme Court judge in June to order the two warring developers to either sell or buy the other out within 30 days.
Occupying a full block on East 65th and 66th streets and Second and Third avenues, Manhattan House, includes 575 rental units that are slated to become luxury condominium apartments as tenants' leases expire.
Kalikow's Alpha Manhattan group sent out a release on July 18 stating that it had received financing from UBS and "has exercised its right to buy out O'Connor North America (ONA) and purchase its interest in Manhattan House."
But late yesterday, Kalikow sent a signed letter to ONA saying: "Alpha will not become the purchasing member pursuant to the Buy-Sell notice."
The letter further stated that "Alpha confirms that ONA will close the acquisition of Alpha's interest in Manhattan House Partners LLC no later [than] August 31, 2007."
"Now that Mr. O'Connor has prevailed, I'm sure the conversion will be an even bigger success," said an exuberant Dolly Lenz, the vice-chairman of Prudential Douglas Elliman, who will be heading the marketing of the pricey project.
Kalikow buys out Manhattan House Partner
Daniel Geiger, Real Estate Weekly
July 19, 2007
Pays $119 million for Jeremiah O'Connor's stake in the property settling lawsuit
Richard Kalikow has bought out his investment partner, Jeremiah O’Connor Jr., in the Upper East Side rental apartment building, Manhattan House, which the two purchased in October 2005 in order to convert into condominiums. The two had been in a lawsuit in recent months that was launched by O’Connor’s ownership interest, ONA Manhattan House LLC, in order to force a breakup of the partnership.
According to court documents O’Connor and Kalikow had been feuding over the conversion’s financing, the scope of the work, as well as how the project would be marketed and the design of its Web site. Among the complaints listed in court documents, O’Connor alleged that Kalikow’s ownership entity in the property, Alpha Manhattan LLC, submitted insufficient budget proposals for the conversion work that subsequently were rejected by lenders, delaying O’Connor’s plans for the property. It appears that O’Connor and Kalikow had different ideas regarding how much work would be conducted.
“ONA has objected to Alpha about the proposed apartment renovations,” ONA’s complaint stated. “Alpha has attempted to justify its suggested mix of apartments on the ground that it wants to create a large inventory of smaller apartments and offer customized units in lieu of larger combination apartments. Alpha never consulted ONA concerning this unilateral, significant and improper diviation from the strategy of maximizing the number of larger combination units.”
But the acrimony seemed to permeate even the project’s smaller details.
“Alpha and ONA have been unable to agree on the website design,” ONA’s complaint read. “First, the concept pages for the website initially presented to ONA incorporated elements from the marketing materials and were of inferior design.”
ONA had sought to force Kalikow to either sell his stake in the property for $31 million or buy ONA’s for $119 million as part of a buy-sell clause in their partnership agreement. ONA’s interest was more valuable the documents show because the firm had invested considerably more in the $889 million Manhattan House, $97.6 million versus Kalikow’s $24.6 million. The documents noted that only $779 million of the purchase price has been paid so far through equity and debt.
ONA had been suing Kalikow because it said he hadn’t recognized their decision to invoke the breakup.
Lawyers for both Kalikow and O’Connor would not comment on the case.
A statement released by Rubenstein Associates only stated that Kalikow had exercised his right to buy out his partner in the 575-unit luxury apartment building on East 66th Street. It said that UBS is providing the financing for Kalikow, but wasn’t specific about whether it would be for the acquisition of O’Connor’s interest or to cover the cost of the conversion.
That release also stated that Kalikow and O’Connor purchased the building from New York Life for $623 million, not the $889 million that O’Connor’s complaint states.
July 19, 2007
Pays $119 million for Jeremiah O'Connor's stake in the property settling lawsuit
Richard Kalikow has bought out his investment partner, Jeremiah O’Connor Jr., in the Upper East Side rental apartment building, Manhattan House, which the two purchased in October 2005 in order to convert into condominiums. The two had been in a lawsuit in recent months that was launched by O’Connor’s ownership interest, ONA Manhattan House LLC, in order to force a breakup of the partnership.
According to court documents O’Connor and Kalikow had been feuding over the conversion’s financing, the scope of the work, as well as how the project would be marketed and the design of its Web site. Among the complaints listed in court documents, O’Connor alleged that Kalikow’s ownership entity in the property, Alpha Manhattan LLC, submitted insufficient budget proposals for the conversion work that subsequently were rejected by lenders, delaying O’Connor’s plans for the property. It appears that O’Connor and Kalikow had different ideas regarding how much work would be conducted.
“ONA has objected to Alpha about the proposed apartment renovations,” ONA’s complaint stated. “Alpha has attempted to justify its suggested mix of apartments on the ground that it wants to create a large inventory of smaller apartments and offer customized units in lieu of larger combination apartments. Alpha never consulted ONA concerning this unilateral, significant and improper diviation from the strategy of maximizing the number of larger combination units.”
But the acrimony seemed to permeate even the project’s smaller details.
“Alpha and ONA have been unable to agree on the website design,” ONA’s complaint read. “First, the concept pages for the website initially presented to ONA incorporated elements from the marketing materials and were of inferior design.”
ONA had sought to force Kalikow to either sell his stake in the property for $31 million or buy ONA’s for $119 million as part of a buy-sell clause in their partnership agreement. ONA’s interest was more valuable the documents show because the firm had invested considerably more in the $889 million Manhattan House, $97.6 million versus Kalikow’s $24.6 million. The documents noted that only $779 million of the purchase price has been paid so far through equity and debt.
ONA had been suing Kalikow because it said he hadn’t recognized their decision to invoke the breakup.
Lawyers for both Kalikow and O’Connor would not comment on the case.
A statement released by Rubenstein Associates only stated that Kalikow had exercised his right to buy out his partner in the 575-unit luxury apartment building on East 66th Street. It said that UBS is providing the financing for Kalikow, but wasn’t specific about whether it would be for the acquisition of O’Connor’s interest or to cover the cost of the conversion.
That release also stated that Kalikow and O’Connor purchased the building from New York Life for $623 million, not the $889 million that O’Connor’s complaint states.
Friday, July 06, 2007
Manhattan House Tenants Sue to Halt Condo Conversion
Tenants of Manhattan House have filed a lawsuit to cancel the owners’ proposed condominium conversion. Manhattan House is a 583-unit apartment building on Manhattan’s Upper East Side. The $1.1 billion offering is the largest proposed condominium conversion on record.
On Tuesday, July 3, tenants represented by David Rozenholc, filed an Article 78 petition claming that New York State Attorney General Andrew Cuomo arbitrarily and capriciously approved the sponsors’ condominium offering plan.
In the court papers, tenants claim that Cuomo abused his discretion on various grounds by, among other things, overlooking defective certifications by sponsors Jeremiah O’Connor and Richard Kalikow—and by their engineer—excess vacancy issues, and violations of the Martin Act.
This is the latest development in what has proven to be a highly contentious and problem-ridden conversion, with the two co-owners currently embroiled in litigation directed at ousting each other from the project.
To date, only a single insider has offered to purchase, the exclusive period for insiders to buy having been extended until July 20, when the petition will be heard.
Credit Suisse underwrote the Manhattan House conversion, together with other condominium projects, as part of a mortgage backed securities loan placed in 2005. The Manhattan House portion represents 54.5% of the entire loan.
Wednesday, June 27, 2007
Kalikow v O'Connor Manhattan House Lawsuit Documents
Here are three links to documents pertaining to the Kalikow v O'Connor Manhattan House lawsuits
Main complaint - this is a 129 page document and will take several minutes to download
Memo in support of preliminary injunctions - 54 pages
Memo in opposition to motions for a preliminary injunctions - 18 pages
Main complaint - this is a 129 page document and will take several minutes to download
Memo in support of preliminary injunctions - 54 pages
Memo in opposition to motions for a preliminary injunctions - 18 pages
Wednesday, June 20, 2007
Manhattan House In-Fighting Leads to Fitch Downgrade
June 19, 2007 03:55 PM Eastern Daylight Time
Fitch Downgrades 2 Classes of CSFB 2005-CND2
CHICAGO--(BUSINESS WIRE)--Fitch Ratings downgrades and removes from Rating Watch Negative the following classes of Credit Suisse First Boston's (CSFB) commercial mortgage pass-through certificates, series 2005-CND2:
--$23 million class M to 'BB' from 'BBB-';
--$18.8 million class N to 'BB-' from 'BBB-'.
In addition, Fitch affirms the following classes:
--$375.4 million class A-2 at 'AAA';
--Interest-only class A-X-1 at 'AAA';
--Interest-only class A-X-2 at 'AAA';
--Interest-only class A-X-3 at 'AAA';
--Interest-only class A-X-4 at 'AAA';
--Interest-only class A-X-5 at 'AAA';
--Interest-only class A-Y at 'AAA';
--$64 million class B at 'AAA';
--$63 million class C at 'AA';
--$39 million class D at 'AA';
--$36 million class E at 'AA-';
--$35 million class F at 'A+';
--$37 million class G at 'A';
--$33 million class H at 'A-';
--$36 million class J at BBB+';
--$32 million class K at 'BBB';
--$32 million class L at 'BBB-'.
Classes A-1, A-1S, and A-1J have been paid in full.
As of the June 2007 remittance date, the transaction's principal balance had decreased by 58.6% to $824.3 million from $2 billion at issuance due to the payment in full of twelve loans. Eight loans remain in the transaction. Five are secured by multifamily rental properties that are undergoing conversion to individual condominiums. Three loans are secured by multifamily properties with cancelled condominium conversions. All loans are current, and none are specially-serviced. There have been no losses to the trust.
The downgrades are due to several Fitch concerns about the transaction's remaining loans; upcoming 2007 maturity dates, geographic concentration (all of the remaining loans are secured by properties in either New York or Florida), concentration by size (the five largest loans comprise 90.1% of the transaction), oversupply in various Florida condominium markets, and delays at the largest loan in the transaction - Manhattan House (54.6%). All of the loans mature in 2007.
Four (17.8%) of the eight remaining loans are in Florida. Three of the loans in Florida are secured by multifamily properties that are no longer being converted to condos: Mizner Court (7%), Spring Harbor (4.6%) and Spring Landing (3.8%). All three are being re-leased as rental properties. Fitch is concerned that they do not generate sufficient cash flows as rentals to support their current debt levels, and as a result the loans no longer maintain investment-grade credit assessments.
The Manhattan House loan is secured by a 583-unit multifamily rental building located on the Upper East Side of Manhattan, New York. As of the June 2007 remittance, there had been no sales or contracts signed for any of the units. Fitch is monitoring the ongoing status of litigation between the partners and its impact on the loan's performance.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Downgrades 2 Classes of CSFB 2005-CND2
CHICAGO--(BUSINESS WIRE)--Fitch Ratings downgrades and removes from Rating Watch Negative the following classes of Credit Suisse First Boston's (CSFB) commercial mortgage pass-through certificates, series 2005-CND2:
--$23 million class M to 'BB' from 'BBB-';
--$18.8 million class N to 'BB-' from 'BBB-'.
In addition, Fitch affirms the following classes:
--$375.4 million class A-2 at 'AAA';
--Interest-only class A-X-1 at 'AAA';
--Interest-only class A-X-2 at 'AAA';
--Interest-only class A-X-3 at 'AAA';
--Interest-only class A-X-4 at 'AAA';
--Interest-only class A-X-5 at 'AAA';
--Interest-only class A-Y at 'AAA';
--$64 million class B at 'AAA';
--$63 million class C at 'AA';
--$39 million class D at 'AA';
--$36 million class E at 'AA-';
--$35 million class F at 'A+';
--$37 million class G at 'A';
--$33 million class H at 'A-';
--$36 million class J at BBB+';
--$32 million class K at 'BBB';
--$32 million class L at 'BBB-'.
Classes A-1, A-1S, and A-1J have been paid in full.
As of the June 2007 remittance date, the transaction's principal balance had decreased by 58.6% to $824.3 million from $2 billion at issuance due to the payment in full of twelve loans. Eight loans remain in the transaction. Five are secured by multifamily rental properties that are undergoing conversion to individual condominiums. Three loans are secured by multifamily properties with cancelled condominium conversions. All loans are current, and none are specially-serviced. There have been no losses to the trust.
The downgrades are due to several Fitch concerns about the transaction's remaining loans; upcoming 2007 maturity dates, geographic concentration (all of the remaining loans are secured by properties in either New York or Florida), concentration by size (the five largest loans comprise 90.1% of the transaction), oversupply in various Florida condominium markets, and delays at the largest loan in the transaction - Manhattan House (54.6%). All of the loans mature in 2007.
Four (17.8%) of the eight remaining loans are in Florida. Three of the loans in Florida are secured by multifamily properties that are no longer being converted to condos: Mizner Court (7%), Spring Harbor (4.6%) and Spring Landing (3.8%). All three are being re-leased as rental properties. Fitch is concerned that they do not generate sufficient cash flows as rentals to support their current debt levels, and as a result the loans no longer maintain investment-grade credit assessments.
The Manhattan House loan is secured by a 583-unit multifamily rental building located on the Upper East Side of Manhattan, New York. As of the June 2007 remittance, there had been no sales or contracts signed for any of the units. Fitch is monitoring the ongoing status of litigation between the partners and its impact on the loan's performance.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Battle for Manhattan House Heats Up
June 17, 2007
by Braden Keil
New York Post
It's not just the tenants who are allegedly getting booted from their market-rate apartments at Manhattan House. Now it's the new owners who are trying to evict each other.
Jeremiah O'Connor and Richard Kalikow, who are in the midst of the city's costliest condo conversion - at a reported $1.1 billion - have taken their skirmish to Manhattan Supreme Court, where a judge has determined that either man must buy the other one out in 30 days.
At stake is a five-building, 20-story complex, where Grace Kelly once resided, which encompasses an entire city block between Second and Third avenues and East 65th and 66th streets. The two moguls bought it in October 2005.
The two paid $623 million - more than $1 million per apartment - and received nearly $800 million in additional financing. The 20-story postwar buildings, with almost 600 units, are slated to become pricey remodeled condominiums at nearly $2,000 per square foot as tenants leases expire.
"Jerry O'Connor has the upper hand on this ruling," said a source familiar with the case. "He already has the money, while Kalikow is going to have go fish."
Kalikow was said to have had the backing of UBS, but the enthusiasm of the Swiss-based financial giant for the project was said to be waning.
According to sources, O'Connor was dissatisfied with Kalikow's duties, which included coming up with a viable marketing plan.
Kalikow could not be reached, while O'Connor had no comment when reached at his office.
The tenants, meanwhile, are not going out without a fight.
While just over 100 residents have moved out, many, mostly rent-regulated, have said they're staying put. "They're going to have to cart me out of here in a box," vowed one resident.
But one elderly resident, Martin Burwick, a 97-year-old man in failing health, died of pneumonia, allegedly because of dust and asbestos kicked up by the construction work.
by Braden Keil
New York Post
It's not just the tenants who are allegedly getting booted from their market-rate apartments at Manhattan House. Now it's the new owners who are trying to evict each other.
Jeremiah O'Connor and Richard Kalikow, who are in the midst of the city's costliest condo conversion - at a reported $1.1 billion - have taken their skirmish to Manhattan Supreme Court, where a judge has determined that either man must buy the other one out in 30 days.
At stake is a five-building, 20-story complex, where Grace Kelly once resided, which encompasses an entire city block between Second and Third avenues and East 65th and 66th streets. The two moguls bought it in October 2005.
The two paid $623 million - more than $1 million per apartment - and received nearly $800 million in additional financing. The 20-story postwar buildings, with almost 600 units, are slated to become pricey remodeled condominiums at nearly $2,000 per square foot as tenants leases expire.
"Jerry O'Connor has the upper hand on this ruling," said a source familiar with the case. "He already has the money, while Kalikow is going to have go fish."
Kalikow was said to have had the backing of UBS, but the enthusiasm of the Swiss-based financial giant for the project was said to be waning.
According to sources, O'Connor was dissatisfied with Kalikow's duties, which included coming up with a viable marketing plan.
Kalikow could not be reached, while O'Connor had no comment when reached at his office.
The tenants, meanwhile, are not going out without a fight.
While just over 100 residents have moved out, many, mostly rent-regulated, have said they're staying put. "They're going to have to cart me out of here in a box," vowed one resident.
But one elderly resident, Martin Burwick, a 97-year-old man in failing health, died of pneumonia, allegedly because of dust and asbestos kicked up by the construction work.
Manhattan House Divided
June 17, 2007
By JOSH BARBANEL
New York Times
BREAKING up is hard to do, particularly for the developers of one of the most ambitious and expensive condominium conversions ever: the redevelopment of the Manhattan House, a complex with 582 apartments on a full square block on East 66th Street and Third Avenue.
The state attorney general approved sales at the $1.1 billion conversion this spring. But sales have been stalled while the project’s general manager, N. Richard Kalikow, a real estate investor and developer, has been feuding in court and out with his partner, Jeremiah W. O’Connor Jr., the managing partner of O’Connor Capital Partners, a private equity firm.
Last week, a State Supreme Court judge ordered that one partner buy the other out, under the terms of their agreement. But lawyers for Mr. Kalikow immediately filed a notice of appeal, and in the meantime are attempting to block the judge’s order.
Mr. O’Connor asked the court to order the buyout, while, according to associates, Mr. Kalikow was trying to put together investors to help him take over the huge project and refinance it.
The project has long faced legal challenges from angry tenants who have been living in the building during a year of messy renovations. But the court papers show that the project has also been troubled by cost overruns, along with disputes over the marketing campaign, access to the project records and even its Web site design.
The project is being marketed by Prudential Douglas Elliman, but with the sponsors in disarray, there have been no reports of contracts signed at Manhattan House. While most developers prefer to build with other people’s money, the papers show that for many months the construction has been paid for by regular “capital calls,” in which the partners provide cash to meet construction costs. The project’s lender refused to provide construction loans after the partners were unable to work out an agreement to provide a $30 million letter of credit to deal with the cost overruns, court papers say.
Yet with the huge demand for luxury apartments in Manhattan and with prices on the rise, it is not clear whether the dispute reflects financial distress or a struggle by one side or the other to capture a greater share of the rising potential profits.
In the court papers, Mr. O’Connor’s lawyer, Max R. Shulman, argued that Mr. Kalikow and his team had mismanaged the project, and with the partners unable to agree, Mr. O’Connor had the right to demand that Mr. Kalikow either buy him out or agree to be bought out. “It cannot be known how many sales and how much revenue have been and will continue to be lost as a result,” he said in court papers of the management.
But Mr. Kalikow’s lawyer, Mitchell A. Karlan, said the objections were a ruse, raised in bad faith to force Mr. Kalikow out of the deal and capture all the profits just as sales were beginning.
He said the issues raised in court were many months old and were brought up just before the final approved offering plan, known as the “black book,” was distributed to tenants in the building, triggering the beginning of sales. Once sales began, Mr. Kalikow’s share of the returns would eventually rise to as much as 40 percent from about 20 percent, he said.
The court decision would give Mr. Kalikow the first right to buy out his partner, and if he refused, Mr. O’Connor could buy him out. But because Mr. O’Connor and his investors put far more cash into the project than Mr. Kalikow did — $119 million versus $31 million, according to court papers — Mr. Kalikow would have to raise more money for the buyout.
Under the ruling last Tuesday by Justice Bernard J. Fried of State Supreme Court in Manhattan, Mr. O’Connor was required to post a $30 million bond to cover any potential damages that might eventually be owed to Mr. Kalikow under future court rulings. Once the payment is made, Mr. Kalikow will be given 30 days to decide whether to buy out Mr. O’Connor or give up his own interest in Manhattan House. At the hearing, Mr. O’Connor’s lawyers said they would post the $30 million in a few days, but that was before a notice of appeal was filed.
By JOSH BARBANEL
New York Times
BREAKING up is hard to do, particularly for the developers of one of the most ambitious and expensive condominium conversions ever: the redevelopment of the Manhattan House, a complex with 582 apartments on a full square block on East 66th Street and Third Avenue.
The state attorney general approved sales at the $1.1 billion conversion this spring. But sales have been stalled while the project’s general manager, N. Richard Kalikow, a real estate investor and developer, has been feuding in court and out with his partner, Jeremiah W. O’Connor Jr., the managing partner of O’Connor Capital Partners, a private equity firm.
Last week, a State Supreme Court judge ordered that one partner buy the other out, under the terms of their agreement. But lawyers for Mr. Kalikow immediately filed a notice of appeal, and in the meantime are attempting to block the judge’s order.
Mr. O’Connor asked the court to order the buyout, while, according to associates, Mr. Kalikow was trying to put together investors to help him take over the huge project and refinance it.
The project has long faced legal challenges from angry tenants who have been living in the building during a year of messy renovations. But the court papers show that the project has also been troubled by cost overruns, along with disputes over the marketing campaign, access to the project records and even its Web site design.
The project is being marketed by Prudential Douglas Elliman, but with the sponsors in disarray, there have been no reports of contracts signed at Manhattan House. While most developers prefer to build with other people’s money, the papers show that for many months the construction has been paid for by regular “capital calls,” in which the partners provide cash to meet construction costs. The project’s lender refused to provide construction loans after the partners were unable to work out an agreement to provide a $30 million letter of credit to deal with the cost overruns, court papers say.
Yet with the huge demand for luxury apartments in Manhattan and with prices on the rise, it is not clear whether the dispute reflects financial distress or a struggle by one side or the other to capture a greater share of the rising potential profits.
In the court papers, Mr. O’Connor’s lawyer, Max R. Shulman, argued that Mr. Kalikow and his team had mismanaged the project, and with the partners unable to agree, Mr. O’Connor had the right to demand that Mr. Kalikow either buy him out or agree to be bought out. “It cannot be known how many sales and how much revenue have been and will continue to be lost as a result,” he said in court papers of the management.
But Mr. Kalikow’s lawyer, Mitchell A. Karlan, said the objections were a ruse, raised in bad faith to force Mr. Kalikow out of the deal and capture all the profits just as sales were beginning.
He said the issues raised in court were many months old and were brought up just before the final approved offering plan, known as the “black book,” was distributed to tenants in the building, triggering the beginning of sales. Once sales began, Mr. Kalikow’s share of the returns would eventually rise to as much as 40 percent from about 20 percent, he said.
The court decision would give Mr. Kalikow the first right to buy out his partner, and if he refused, Mr. O’Connor could buy him out. But because Mr. O’Connor and his investors put far more cash into the project than Mr. Kalikow did — $119 million versus $31 million, according to court papers — Mr. Kalikow would have to raise more money for the buyout.
Under the ruling last Tuesday by Justice Bernard J. Fried of State Supreme Court in Manhattan, Mr. O’Connor was required to post a $30 million bond to cover any potential damages that might eventually be owed to Mr. Kalikow under future court rulings. Once the payment is made, Mr. Kalikow will be given 30 days to decide whether to buy out Mr. O’Connor or give up his own interest in Manhattan House. At the hearing, Mr. O’Connor’s lawyers said they would post the $30 million in a few days, but that was before a notice of appeal was filed.
White Bricks and Pale Imitations
Best of a Bad Lot, Manhattan House Heard as Landmark
April 15, 2007
by JAKE MOONEY
New York Times
MANHATTAN HOUSE, the 19-story slab of an apartment building on a full Upper East Side block bounded by 65th and 66th Streets and Second and Third Avenues, was built to stand out, from its size to its stark silhouette to its most striking feature: its bold white-brick skin.
Time, changes in fashion and a host of pale imitations around the neighborhood have perhaps made the facade less surprising, but this month the building, which is actually light gray, may be on its way to getting the recognition that advocates say is long overdue. The city’s Landmarks Preservation Commission is considering protecting the building and heard testimony on the matter last week, while the local community board plans to consider it this week.
Meanwhile, Manhattan House tenants, who are involved in a long struggle with its owners over plans to convert the building to condominiums, hope that a landmark designation will preserve elements they love.
The building, completed in 1950 and designed by the firms Skidmore, Owings & Merrill and Mayer & Whittlesey, was part of a project by the New York Life Insurance Company, which bought adjacent land and kept buildings there low to ensure Manhattan House had abundant light, air and visibility. The pale brick exterior, one of the first of its kind, was meant to stand for cleanliness; the bricks were covered in a glaze to make them self-cleaning in the rain.
"It wasn’t the high-end part of the Upper East Side, and when it went up, the Third Avenue el was still there," Seri Worden, executive director of Friends of the Upper East Side Historic Districts, said last week. "So it would have been very impressive to see this 19-story white building rising among the brownstones and old tenement buildings."
John Jurayj, co-chairman of the Modern Architecture Working Group, a collective of preservationists pushing for landmark designation of Manhattan House and other modernist buildings including 40 Central Park South, a white-brick precursor, called Manhattan House a synthesis of high modernism and middle-class living, and one of the city’s first and best manifestations of the theories of Le Corbusier.
"It was a belief on some level that industrialization in general, and the byproducts of it — your kitchen stove, your refrigerator — could free you up to have a better life," Mr. Jurayj said. "It was a very hopeful idea of designing and living."
Developers of a half-century ago, though, took another lesson from the building where Benny Goodman and Grace Kelly once lived: white brick was in. The resulting homages were less than sparkling.
"It’s exciting — at first," Simeon Bankoff, executive director of the Historic Districts Council, said of the medium. "Then it becomes banal. Manhattan House is an incredibly important building, and it was really the very best of a bad lot."
The proliferation of copycats may have robbed the building of some of its distinctiveness, but Mr. Jurayj said the bricks, which eventually fell out of fashion, were not to blame. "Most of the other white-brick buildings in the city, it’s not the white brick that’s the problem," he said. "It’s not the material. It’s a paucity of skill and imagination in those architects."
What sets Manhattan House apart, he added, is the little touches, like the large picture windows, glass-fronted balconies and landscaped gardens. Details like those, along with the building’s height and outward appearance, are what tenants hope landmark designation would preserve.
The building’s current owners, N. Richard Kalikow and Jeremiah O’Connor, are in the midst of a billion-dollar conversion to condominiums, and the Manhattan House Tenants Group says hundreds of tenants have been forced out. The owners, who deny any impropriety, consider the building "an iconic property truly deserving of landmark status," said their spokeswoman, Barbara Wagner.Preservationists, meanwhile, hope the attention will benefit other modernist buildings, which have generally been harder to protect.
Modern designs, Ms. Worden said, "don’t always have the same heart-tugging appeal of older buildings, but they are an important part of New York’s cityscape."
Mr. Jurayj noted that even Manhattan House, which is relatively well known and well liked, was eligible for landmark status for more than 25 years before last week’s hearing. "You run the risk," he said, "of losing important things."
April 15, 2007
by JAKE MOONEY
New York Times
MANHATTAN HOUSE, the 19-story slab of an apartment building on a full Upper East Side block bounded by 65th and 66th Streets and Second and Third Avenues, was built to stand out, from its size to its stark silhouette to its most striking feature: its bold white-brick skin.
Time, changes in fashion and a host of pale imitations around the neighborhood have perhaps made the facade less surprising, but this month the building, which is actually light gray, may be on its way to getting the recognition that advocates say is long overdue. The city’s Landmarks Preservation Commission is considering protecting the building and heard testimony on the matter last week, while the local community board plans to consider it this week.
Meanwhile, Manhattan House tenants, who are involved in a long struggle with its owners over plans to convert the building to condominiums, hope that a landmark designation will preserve elements they love.
The building, completed in 1950 and designed by the firms Skidmore, Owings & Merrill and Mayer & Whittlesey, was part of a project by the New York Life Insurance Company, which bought adjacent land and kept buildings there low to ensure Manhattan House had abundant light, air and visibility. The pale brick exterior, one of the first of its kind, was meant to stand for cleanliness; the bricks were covered in a glaze to make them self-cleaning in the rain.
"It wasn’t the high-end part of the Upper East Side, and when it went up, the Third Avenue el was still there," Seri Worden, executive director of Friends of the Upper East Side Historic Districts, said last week. "So it would have been very impressive to see this 19-story white building rising among the brownstones and old tenement buildings."
John Jurayj, co-chairman of the Modern Architecture Working Group, a collective of preservationists pushing for landmark designation of Manhattan House and other modernist buildings including 40 Central Park South, a white-brick precursor, called Manhattan House a synthesis of high modernism and middle-class living, and one of the city’s first and best manifestations of the theories of Le Corbusier.
"It was a belief on some level that industrialization in general, and the byproducts of it — your kitchen stove, your refrigerator — could free you up to have a better life," Mr. Jurayj said. "It was a very hopeful idea of designing and living."
Developers of a half-century ago, though, took another lesson from the building where Benny Goodman and Grace Kelly once lived: white brick was in. The resulting homages were less than sparkling.
"It’s exciting — at first," Simeon Bankoff, executive director of the Historic Districts Council, said of the medium. "Then it becomes banal. Manhattan House is an incredibly important building, and it was really the very best of a bad lot."
The proliferation of copycats may have robbed the building of some of its distinctiveness, but Mr. Jurayj said the bricks, which eventually fell out of fashion, were not to blame. "Most of the other white-brick buildings in the city, it’s not the white brick that’s the problem," he said. "It’s not the material. It’s a paucity of skill and imagination in those architects."
What sets Manhattan House apart, he added, is the little touches, like the large picture windows, glass-fronted balconies and landscaped gardens. Details like those, along with the building’s height and outward appearance, are what tenants hope landmark designation would preserve.
The building’s current owners, N. Richard Kalikow and Jeremiah O’Connor, are in the midst of a billion-dollar conversion to condominiums, and the Manhattan House Tenants Group says hundreds of tenants have been forced out. The owners, who deny any impropriety, consider the building "an iconic property truly deserving of landmark status," said their spokeswoman, Barbara Wagner.Preservationists, meanwhile, hope the attention will benefit other modernist buildings, which have generally been harder to protect.
Modern designs, Ms. Worden said, "don’t always have the same heart-tugging appeal of older buildings, but they are an important part of New York’s cityscape."
Mr. Jurayj noted that even Manhattan House, which is relatively well known and well liked, was eligible for landmark status for more than 25 years before last week’s hearing. "You run the risk," he said, "of losing important things."
Wednesday, February 14, 2007
Questions surface about controversial Manhattan House financing
By Vanessa Londono and Gabby Warshawer - February 13, 2007
The Real Deal
While the Upper East Side's massive Manhattan House is slowly being converted from rental to condo, questions remain about the project's controversial financing structure, which involves securitization bonds.
Fitch Ratings released a statement yesterday flagging the property's loan, noting, "Fitch is concerned about delays at the Manhattan House...The Manhattan House loan is secured by a 583-unit multifamily rental building...As of the January 2007 remittance, there had been no sales or contracts signed for any of the units."
Contracts and sales for the conversion, however, cannot occur until the project is approved by the New York State Attorney General's Office, an approval that Manhattan House's owners expect to occur shortly.
Manhattan House's owners said the project was not experiencing delays.
"There has been no delay in the Manhattan House project. We are awaiting approval from the Attorney General and until Manhattan House receives that approval, there can be no sales or contracts signed," they said.
The first condo conversion bonds appeared in 2005, but relatively few investors have utilized the securities. Real estate experts have warned that the financing could be problematic if a conversion is unsuccessful.
Manhattan House's owners Richard Kalikow and Jeremiah O'Connor obtained $450 million in securitization bonds underwritten by Credit Suisse to finance the conversion of the building. The condo's mortgage loan was sold with other loans to investors backed by the condo building itself.
"The Manhattan House is among the first condo projects of its size to get financing," said Neil Shapiro, partner at the law firm of Herrick, Feinstein.
According to tenants of the Manhattan House, when Kalikow and O'Connor used securitization bonds to fund the condo conversion, details were released to the public by independent rating agents before the proposal was reviewed. Tenants argue that this violated the Martin Act, which governs condo conversions.
"The issue has been resolved," said Jin Lee, chief financial officer for Kalikow's company, Manchester Real Estate. "To have a loan financed in the public market, rating agents will do their own independent underwriting reports of the building. We can't stop them from doing their own decisions and judgments but that's not what our offer is."
The Real Deal
While the Upper East Side's massive Manhattan House is slowly being converted from rental to condo, questions remain about the project's controversial financing structure, which involves securitization bonds.
Fitch Ratings released a statement yesterday flagging the property's loan, noting, "Fitch is concerned about delays at the Manhattan House...The Manhattan House loan is secured by a 583-unit multifamily rental building...As of the January 2007 remittance, there had been no sales or contracts signed for any of the units."
Contracts and sales for the conversion, however, cannot occur until the project is approved by the New York State Attorney General's Office, an approval that Manhattan House's owners expect to occur shortly.
Manhattan House's owners said the project was not experiencing delays.
"There has been no delay in the Manhattan House project. We are awaiting approval from the Attorney General and until Manhattan House receives that approval, there can be no sales or contracts signed," they said.
The first condo conversion bonds appeared in 2005, but relatively few investors have utilized the securities. Real estate experts have warned that the financing could be problematic if a conversion is unsuccessful.
Manhattan House's owners Richard Kalikow and Jeremiah O'Connor obtained $450 million in securitization bonds underwritten by Credit Suisse to finance the conversion of the building. The condo's mortgage loan was sold with other loans to investors backed by the condo building itself.
"The Manhattan House is among the first condo projects of its size to get financing," said Neil Shapiro, partner at the law firm of Herrick, Feinstein.
According to tenants of the Manhattan House, when Kalikow and O'Connor used securitization bonds to fund the condo conversion, details were released to the public by independent rating agents before the proposal was reviewed. Tenants argue that this violated the Martin Act, which governs condo conversions.
"The issue has been resolved," said Jin Lee, chief financial officer for Kalikow's company, Manchester Real Estate. "To have a loan financed in the public market, rating agents will do their own independent underwriting reports of the building. We can't stop them from doing their own decisions and judgments but that's not what our offer is."
Monday, February 12, 2007
Fitch remains negative on the Manhattan House loan
Fitch is concerned about delays at the Manhattan House (32.1%) and Toy Buildings (13.5%) loans. The Manhattan House loan is secured by a 583-unit multifamily rental building located on the Upper East Side of Manhattan, New York. As of the January 2007 remittance, there had been no sales or contracts signed for any of the units.
Read the full press release here
Read the full press release here
Saturday, February 10, 2007
Manhattan House goes condo -- slowly
Owners begin renovations of only a handful of units
By Vanessa Londono, February 2007, The Real Deal
Manhattan House The developers of Manhattan House, who paid a record price for the Upper East Side building, are going to be making back their money only a few units at a time.
Owners Richard Kalikow and Jeremiah O'Connor have begun the first round of conversions on the 580-unit white-brick rental property located at 200 East 66th Street, which they purchased for $623 million in mid-2005. At the time, it was the most expensive price paid for a rental complex, setting a Manhattan record at $1.072 million per apartment.
The high price the developers paid at the peak of the market led the industry to speculate about whether they had overpaid and whether they could recoup their investment. At the time, Kalikow was quoted as saying that even if the broader market remained flat, he expected prices at Manhattan House to rise, due to a shortage of high-quality condos on the East Side.
"[Kalikow and O'Connor] certainly paid a very high per-unit price, making their margin for error that much smaller," said Neil Shapiro, a partner at the law firm of Herrick, Feinstein who deals with commercial financing.
"When they purchased, the market was stronger, but now the market for million-dollar or a million-and-a-half homes isn't so strong," Shapiro added.
Renovations of 30 units are under way as part of a project that will eventually be worth $1.1 billion, according to documents filed by the developers. Units won't hit the market until the building's offering plan is approved by the state attorney general's office; it was filed more than a year ago, said Jin Lee, chief financial officer for Kalikow's company, Manchester Real Estate.
The mix of units and prices has yet to be released, hinging on expected attorney general approval. Other apartments will be renovated and converted to condos as they become vacant, said Lee.
While the number of units hitting the market at first will be small, it's also part of a marketing strategy, Lee said.
The first phase will be completed in four months, but the time frame for converting the entire block-long Manhattan House has yet to be determined. It "may be never," according to Mikhail Khlyavich, director of construction for Manhattan House.
For one thing, developers face limits on how many units can hit the market. Units that are rent-stabilized cannot be converted automatically into condominium units. At Manhattan House, approximately 250 of the 580 units are rent-stabilized.
Scope of renovations
Plans for Manhattan House will include a full range of apartment sizes, from studios to four- and possibly five-bedroom condos. The top-floor units will remain full-floor penthouses.
Units will range from around 600-square-foot studios to 2,400-square-foot four-bedrooms. Developers are also considering combining apartments, because there is a demand for larger units, and they could make some as big as 3,600 square feet.
Aside from combining units, renovations will be superficial. Apartments will retain their working fireplaces, wide hallways and north- and south-facing windows, which provide cross-ventilation.
"It's not a gut renovation," Lee said. "It has the same layouts with expensive finishes."
The developers are adding new fixtures to the bathrooms and crown molding to the living rooms, as well as glass tiles in the kitchens.
Ceiling heights in the postwar building are eight-and-a-half feet, which is considered a drawback. However, with both north and south views, ceiling heights are not a problem, Khlyavich maintained. He said some apartments will have washer-dryers, and a gym is in the works.
Two months ago, Manhattan House implemented a full concierge service as part of an amenities package available to all rental tenants free of charge. The complex also has one of the largest private gardens in the city.
"We're giving people an option to buy ultra-luxury residences at a luxury location," Lee said. "We think there will be tremendous demand because of the highest quality of design and amenities."
The tenants speak
In the meantime, the tenants association that represents the renters still in the building, the Manhattan House Tenants Group, is trying to get greater price discounts.
"We're trying to get what we think pricing should be for the apartments in the area, given the facilities," said Rafael Urquia, president of the tenants group.
According to Urquia, tenants have been forced to leave because Manhattan House is not renewing leases. He also said tenants have been harassed for a good part of 2006. "We're not happy about what they've done," he said.
Some residents were not offered any renewals when their leases expired, while others were offered short-term leases at exorbitant rates, said Urquia. "Rent-stabilized renters were accused of having other homes, forcing them to incur legal fees" to prove that Manhattan House was their primary residence, he said.
"The owners are in full compliance with the law and are mindful of the rights of all the tenants," Lee responded, noting that "beautiful, spacious apartments with wonderful views and doorman service in the heart of the East Side of Manhattan are in high demand, and the owners are permitted by law to increase market apartments to market rates."
Urquia also said the Manhattan House Tenants Group has raised concerns about asbestos removal with the attorney general as a result of the construction.
"There is absolutely no asbestos problem at Manhattan House," said Lee.
Plastic coverings with zippers separate rental units from the renovated condo units on some floors of the Manhattan House.
Everyone will benefit from the renovations, said Lee, who added it was hard to predict when all of Manhattan House will be a condo.
By Vanessa Londono, February 2007, The Real Deal
Manhattan House The developers of Manhattan House, who paid a record price for the Upper East Side building, are going to be making back their money only a few units at a time.
Owners Richard Kalikow and Jeremiah O'Connor have begun the first round of conversions on the 580-unit white-brick rental property located at 200 East 66th Street, which they purchased for $623 million in mid-2005. At the time, it was the most expensive price paid for a rental complex, setting a Manhattan record at $1.072 million per apartment.
The high price the developers paid at the peak of the market led the industry to speculate about whether they had overpaid and whether they could recoup their investment. At the time, Kalikow was quoted as saying that even if the broader market remained flat, he expected prices at Manhattan House to rise, due to a shortage of high-quality condos on the East Side.
"[Kalikow and O'Connor] certainly paid a very high per-unit price, making their margin for error that much smaller," said Neil Shapiro, a partner at the law firm of Herrick, Feinstein who deals with commercial financing.
"When they purchased, the market was stronger, but now the market for million-dollar or a million-and-a-half homes isn't so strong," Shapiro added.
Renovations of 30 units are under way as part of a project that will eventually be worth $1.1 billion, according to documents filed by the developers. Units won't hit the market until the building's offering plan is approved by the state attorney general's office; it was filed more than a year ago, said Jin Lee, chief financial officer for Kalikow's company, Manchester Real Estate.
The mix of units and prices has yet to be released, hinging on expected attorney general approval. Other apartments will be renovated and converted to condos as they become vacant, said Lee.
While the number of units hitting the market at first will be small, it's also part of a marketing strategy, Lee said.
The first phase will be completed in four months, but the time frame for converting the entire block-long Manhattan House has yet to be determined. It "may be never," according to Mikhail Khlyavich, director of construction for Manhattan House.
For one thing, developers face limits on how many units can hit the market. Units that are rent-stabilized cannot be converted automatically into condominium units. At Manhattan House, approximately 250 of the 580 units are rent-stabilized.
Scope of renovations
Plans for Manhattan House will include a full range of apartment sizes, from studios to four- and possibly five-bedroom condos. The top-floor units will remain full-floor penthouses.
Units will range from around 600-square-foot studios to 2,400-square-foot four-bedrooms. Developers are also considering combining apartments, because there is a demand for larger units, and they could make some as big as 3,600 square feet.
Aside from combining units, renovations will be superficial. Apartments will retain their working fireplaces, wide hallways and north- and south-facing windows, which provide cross-ventilation.
"It's not a gut renovation," Lee said. "It has the same layouts with expensive finishes."
The developers are adding new fixtures to the bathrooms and crown molding to the living rooms, as well as glass tiles in the kitchens.
Ceiling heights in the postwar building are eight-and-a-half feet, which is considered a drawback. However, with both north and south views, ceiling heights are not a problem, Khlyavich maintained. He said some apartments will have washer-dryers, and a gym is in the works.
Two months ago, Manhattan House implemented a full concierge service as part of an amenities package available to all rental tenants free of charge. The complex also has one of the largest private gardens in the city.
"We're giving people an option to buy ultra-luxury residences at a luxury location," Lee said. "We think there will be tremendous demand because of the highest quality of design and amenities."
The tenants speak
In the meantime, the tenants association that represents the renters still in the building, the Manhattan House Tenants Group, is trying to get greater price discounts.
"We're trying to get what we think pricing should be for the apartments in the area, given the facilities," said Rafael Urquia, president of the tenants group.
According to Urquia, tenants have been forced to leave because Manhattan House is not renewing leases. He also said tenants have been harassed for a good part of 2006. "We're not happy about what they've done," he said.
Some residents were not offered any renewals when their leases expired, while others were offered short-term leases at exorbitant rates, said Urquia. "Rent-stabilized renters were accused of having other homes, forcing them to incur legal fees" to prove that Manhattan House was their primary residence, he said.
"The owners are in full compliance with the law and are mindful of the rights of all the tenants," Lee responded, noting that "beautiful, spacious apartments with wonderful views and doorman service in the heart of the East Side of Manhattan are in high demand, and the owners are permitted by law to increase market apartments to market rates."
Urquia also said the Manhattan House Tenants Group has raised concerns about asbestos removal with the attorney general as a result of the construction.
"There is absolutely no asbestos problem at Manhattan House," said Lee.
Plastic coverings with zippers separate rental units from the renovated condo units on some floors of the Manhattan House.
Everyone will benefit from the renovations, said Lee, who added it was hard to predict when all of Manhattan House will be a condo.
Monday, January 29, 2007
Vote on Landmark Status Set for Manhattan House
Vote on Landmark Status Set for Manhattan House
BY GARY SHAPIRO - New York Sun
January 29, 2007
A sprawling white-brick Upper East Side apartment building, which was once inhabited by Grace Kelly and Benny Goodman and inspired other uptown modernist buildings, may become a landmark. The Landmarks Preservation Commission is set to vote tomorrow on whether to pursue landmark designation for Manhattan House, at 200 East 66 Street, whose ample light and ventilation influenced a generation of postwar apartment buildings.
Designed by Skidmore, Owings & Merrill, the gleaming building, which has approximately 583 apartments, received an award from the New York Chapter of the American Institute of Architects in 1952, a year after its completion. Its glass-walled lobbies are set below a spare frame with Bauhaus-style balconies. A sloping driveway traverses the front of the H- shaped apartment building, which stretches between Second and Third avenues and is bounded by 65th and 66th streets.
The president of Docomomo US, an advocacy group for documenting and conserving buildings of the modern movement nationally, Theodore Prudon, said Manhattan House began to set the standard for apartment house designs following World War II. The co-chair of the Modern Architecture Working Group, an ad hoc committee of preservationists, John Jurayj, said this building has always been known, virtually from the time it was built, as architecturally important.
Another Skidmore, Owings & Merrill Building under consideration for landmark status is the Guardian Life Insurance Company Annex at 105 East 17 St (1959-63).
"One of our top priorities is to preserve the city's modern architecture, which is why we are pursuing Manhattan House and Guardian Life with a great deal of determination," said Commission Chairman Robert B. Tierney. "Both of these buildings are important examples of architecture that is finally getting its due." The owners of Manhattan House, N. Richard Kalikow and Jeremiah O'Connor Jr., were unable to be reached by press time. The building has been undergoing conversion to condominiums.
The decision to hold a hearing on Manhattan House has the support of two local council members in the area. Council Member Daniel Garodnick said, "As the City's first white-brick apartment building and one of the finest examples of the International Modern Style, Manhattan House is a strong candidate for landmark designation." Council Member Jessica Lappin agreed the building was worthy of consideration.
The Landmarks Commission has designated other modernist buildings such as the Summit Hotel at 569 Lexington Ave. If the two Skidmore, Owings & Merrill buildings become landmarked, they will join other noteworthy buildings from that firm, such as the Pepsi-Cola Building at 500 Park Ave., the Manufacturer's Trust Company Building at 510 Fifth Ave., and Lever House at 390 Park Ave.
The director of Friends of the Upper East Side Historic Districts, Seri Worden, acknowledged that the landmark process can be a tough sell for some who, for example, might have grown up with the building and do not see why modern buildings were historically important. But she said this building was both important and especially well designed. Its large shiny white presence, she said, was quite a contrast to the dark brick tenements once seen along the elevated train line.
BY GARY SHAPIRO - New York Sun
January 29, 2007
A sprawling white-brick Upper East Side apartment building, which was once inhabited by Grace Kelly and Benny Goodman and inspired other uptown modernist buildings, may become a landmark. The Landmarks Preservation Commission is set to vote tomorrow on whether to pursue landmark designation for Manhattan House, at 200 East 66 Street, whose ample light and ventilation influenced a generation of postwar apartment buildings.
Designed by Skidmore, Owings & Merrill, the gleaming building, which has approximately 583 apartments, received an award from the New York Chapter of the American Institute of Architects in 1952, a year after its completion. Its glass-walled lobbies are set below a spare frame with Bauhaus-style balconies. A sloping driveway traverses the front of the H- shaped apartment building, which stretches between Second and Third avenues and is bounded by 65th and 66th streets.
The president of Docomomo US, an advocacy group for documenting and conserving buildings of the modern movement nationally, Theodore Prudon, said Manhattan House began to set the standard for apartment house designs following World War II. The co-chair of the Modern Architecture Working Group, an ad hoc committee of preservationists, John Jurayj, said this building has always been known, virtually from the time it was built, as architecturally important.
Another Skidmore, Owings & Merrill Building under consideration for landmark status is the Guardian Life Insurance Company Annex at 105 East 17 St (1959-63).
"One of our top priorities is to preserve the city's modern architecture, which is why we are pursuing Manhattan House and Guardian Life with a great deal of determination," said Commission Chairman Robert B. Tierney. "Both of these buildings are important examples of architecture that is finally getting its due." The owners of Manhattan House, N. Richard Kalikow and Jeremiah O'Connor Jr., were unable to be reached by press time. The building has been undergoing conversion to condominiums.
The decision to hold a hearing on Manhattan House has the support of two local council members in the area. Council Member Daniel Garodnick said, "As the City's first white-brick apartment building and one of the finest examples of the International Modern Style, Manhattan House is a strong candidate for landmark designation." Council Member Jessica Lappin agreed the building was worthy of consideration.
The Landmarks Commission has designated other modernist buildings such as the Summit Hotel at 569 Lexington Ave. If the two Skidmore, Owings & Merrill buildings become landmarked, they will join other noteworthy buildings from that firm, such as the Pepsi-Cola Building at 500 Park Ave., the Manufacturer's Trust Company Building at 510 Fifth Ave., and Lever House at 390 Park Ave.
The director of Friends of the Upper East Side Historic Districts, Seri Worden, acknowledged that the landmark process can be a tough sell for some who, for example, might have grown up with the building and do not see why modern buildings were historically important. But she said this building was both important and especially well designed. Its large shiny white presence, she said, was quite a contrast to the dark brick tenements once seen along the elevated train line.
Saturday, January 27, 2007
Attempts to Subvert Anti-Warehousing Law
The sponsors' actions were intended to circumvent New York State's "excess vacancy" or "anti-warehousing" law, according to this January 25, 2007 letter from David Rozenholc to the AG's office.
Read the letter here.
Read the letter here.
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