Crain's New York Developer of controversial condo tower loses bid to stop foreclosure by Daniel Geiger

Crain's New York
Crain's New York
Developer of controversial condo tower loses bid to stop foreclosure
Daniel Geiger
02/24/2016

Joseph Beninati was denied a temporary restraining order that he had sought to block lender Gamma Real Estate from seizing or auctioning properties he wanted to raze to make way for new tower

The developer planning a supertall tower in the Sutton Place neighborhood of Manhattan lost a key decision in court Tuesday, paving the way for a foreclosure auction of his properties.

Joseph Beninati was denied a temporary restraining order that he had sought to block lenderGamma Real Estate from seizing or auctioning off his properties at  428-432 E. 58th St., three contiguous five-story apartment buildings. In January, Beninati, founder of Bauhouse Group,defaulted on a $147.25 million loan from Gamma, a firm controlled by real estate investor N. Richard Kalikow, after trying unsuccessfully to sell the site or refinance it. The court's refusal to grant the restraining order was a major blow to Beninati. 

“We have spent two years of time and millions of dollars,” said Beninati, who looked deflated outside the courtroom in lower Manhattan Tuesday afternoon. 

Gamma’s attorney in the case, Ronald Greenberg of the firm Kramer Levin, disclosed that nine bidders planned to participate in the foreclosure auction scheduled for Feb. 29. Beninati could conceivably recoup some of his investment in the site if a bidder agrees to pay a sum in excess of what Gamma is owed. However, Beninati didn’t see that as a likely outcome.

Beninati’s lawyers, Stephen Meister and Kevin Fritz, accused Gamma of improperly marketing the properties to potential buyers in order to enhance its chances of taking over the site. Some real estate executives who have followed the case expect the properties to end up in Gamma’s possession after Monday’s auction—an outcome that would wipe out Beninati’s investment in the project. 

"I don’t believe there’s information in the hands of bidders that would allow them to understand the complexities of the site,” Beninati said. "If we could get that information into the hands of bidders we would be able to get a collection of offers."

Beninati’s problems come as both real estate lenders and buyers have begun to pull back on construction of high-end condo projects owing to increasing concerns that the condo market may be slowing as an oversupply of newly built multimillion-dollar apartments come up for sale. 

Beninati envisioned demolishing the three buildings on East 58th Street and erecting a 950-foot-tall, ultra-luxury condo tower on the site—a plan that has sparked outcry from some of the project’s neighbors and city officials.   

In court, representatives for Gamma acknowledged the project's challenges.

"The market is turning," Greenberg, Gamma’s attorney, said, urging the court to disallow an injunction that would delay its efforts to take back the properties. "More importantly, there was a press release only last month by the Manhattan borough president, signed by a state senator and City Council members, that they would seek to change the zoning of the site and cut the height from 1,000 feet to 260 feet. Right now we’re exposed."

Issue: 
Land Use