$11M pre-foreclosure filed at Tessler Developments retail condo in Flatiron

The special servicer for a loan with an unpaid balance of just under $11 million filed a pre-foreclosure action alleging the owner of a retail and a commercial condominium unit at 240 Park Avenue South in the Flatiron District, Tessler Developments, has defaulted on loan payments. The special servicer, Rialto Capital Advisors, filed the complaint on October 25, 2024 in New York State Supreme Court in Manhattan. Tessler Developments is led by developer Yitzchak Tessler, which built the residential condo building in 2007, with a $145 million sellout. It has 54 residential units, according to StreetEasy. The residential units are not a party to this litigation. A penthouse unit is currently on the market for $25 million.

The two condo units are the Commercial Unit, with 5,550 square feet on the ground floor, and the Commercial Storage Unit on the lower level with 4,006 square feet.
Case 850406/2024 LINK

Court filings represent the position of one party and are not necessarily accurate or complete.

According to the complaint, “UBS Real Estate Securities Inc. (“Original Lender”) made a loan to Borrower in the original principal amount of $14,000,000 on or about February 25, 2013…Borrower failed to make timely payment of the Monthly Debt Service Payment Amount for November, 2022, and each month thereafter, and failed to pay Plaintiff on the Maturity Date (i.e., March 6, 2023)… Based on the Default that exists under the Loan Documents, as of September 6, 2024, the principal amount of $10,935,573.94, plus unpaid interest at the contractual default rate, plus attorneys’ fees and costs, and all other costs and other amounts due and owing pursuant to the Loan Documents, which shall continue to accrue until paid in full. Interest accrues at the rate of 4.1875% per annum and default interest accrues at the additional rate of 5.000% per annum, for a cumulative rate of 9.1875% per annum.”

This filing comes two months after lender Arc Re filed a $44 million pre-foreclosure against Tessler Developments, alleging that loan secured by the office building at 172 Madison Avenue was in default. That case remains ongoing. Tessler put that building into bankruptcy in June.

The property

The condo building with 48 residential units in Flatiron District has 94,289 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 84 feet and is 100 feet deep with a total lot size of 7,860 square feet. The lot is irregular. The zoning is C6-4A which allows for up to 10 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing.

Development

For the tax lot building, it received its initial certificate of occupancy on May 29, 2015.

Violations and lawsuits

According to city public data, the property has received $1,250 in ECB penalties and $1,750 in OATH penalties in the last year.

There were no lawsuits or bankruptcies filed against the property for the past 24 months.

The neighborhood

In Flatiron District, The majority, or 71 percent of the 23.2 million square feet of commercial built space are office buildings, with elevator buildings next occupying 15 percent of the space. In sales, Flatiron District has near average sales volume among other neighborhoods with $541.9 million in sales volume in the last two years and is the 16th highest in Manhattan. For development, Flatiron District has near average amount of major developments among other neighborhoods and is the 11th highest in Manhattan. It had 3 million square feet of commercial and multi-family construction under development in the last two years, which represents 13 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of seven of the 19 commercial properties representing 329,571 square feet of the 587,057 square feet. The largest owner is Feil Organization, followed by Justin Management and then Michael Marton. There are no active new building construction projects on this tax block.

The owner

The owners according to the Department of Housing Preservation and Development includes Samuel Greene, head officer and Yury Forde, officer. The business entities are Douglas Elliman Property Management and 240 Park Avenue South Condo.

The surrounding

Within a 400-foot radius of 55 East 19 Street, PincusCo identified six commercial real estate items of interests occurred over the past 24 months. One of those six items was a sale which Zar Property NY bought the 67,051-square-foot, 10-unit office building (O6) on 37 East 18th Street for $27 million from Norman Sheer, Sari Greenbaum, and Steve Kerler on September 6, 2024. Of those six items, five were loans above $5 million totaling $97.9 million. The most recent of the five was Lagfin in which borrowed $34 million from Deutsche Bank secured by the 30,031-square-foot, five-unit mixed-use building (K4) on 46 East 21st Street and five other properties on July 17, 2024.

Direct link to the property’s ACRIS page and link to DOB NOW portal.