Check out these photos of a riser taken earlier this week at Manhattan House. The door to this apartment, which is currently being renovated, was left open and a resident took the pictures. The asbestos surrounding the pipe is clearly visible!
This is inexcusable. Families with children live on this floor. Workers handling the asbestos are not being given proper safeguards.
View photo #1
View photo #2
Thursday, January 17, 2008
Monday, January 07, 2008
Manhattan House headache
Excerpted from "Playing by a new set of rules for condo conversions"
The Real Deal, January 2008, by David Jones
After settling a bitter legal dispute with former co-owner Richard Kalikow, developer Jerry O’Connor put together an ambitious plan to convert Manhattan House into a hotel-quality luxury residence, with spa facilities, a resident manager with 65 on-site concierge staff, valet parking, a children’s play center and a 10,000-square-foot rooftop lounge.
But that conversion isn’t moving as smoothly as the developer would like, due in part to tenant complaints. Manhattan House tenants complain that the building suffers from extensive flooding, asbestos contamination, rodents and other problems that the management is trying to cover up.
In an amended filing, Manhattan House officials boosted the insider discount to tenants by 10 points to 25 percent. Only three of the first 15 sales came from insiders, according to the tenants’ group.
Article 78 ruling
Judge Lewis Bart Stone has ruled Manhattan House tenants have no legal standing to file an Article 78 proceeding to halt the owner's condominium plan.
David Rozenholc, attorney for the Manhattan House Tenants Group, said the decision is wrong and contrary to New York State law decided in 1975. The decision will be appealed.
Thursday, December 27, 2007
Manhattan House Infrastructure Problems
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.
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.
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