Highly litigated Turtle Bay rental with $32M loan to be sold through bankruptcy

William Koeppel’s 137-unit Turtle Bay rental property with $32 million in senior debt had been embroiled in class-action landlord-tenant litigation since 2011, but now will be sold through a bankruptcy-led marketing campaign, according to an order confirming the bankruptcy plan signed January 18, 2024.

Tenants at 350 East 52nd Street filed a complaint in 2011 alleging rent overcharges related to J-51 improvements, and the parties battled in New York State courts until that case was settled in March 2023, after the landlord won a ruling that denied treble-damages, as The Real Deal reported at the time.

The settlement from the state court case, 111723/2011, provided a settlement amount of $2.2 million to tenants.

The elevator building with 137 residential units in Turtle Bay has 142,767 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 77 feet and is 150 feet deep with a total lot size of 12,762 square feet. The lot is irregular. The zoning is R10 which allows for up to 10 times floor area ratio (FAR) for residential with inclusionary housing. The city-designated market value for the property in 2022 is $30.6 million.

According to the bankruptcy filings, “In accordance with the Plan… following entry of this Order and Broker Retention Order, the Broker shall market the Sale Assets during the Marketing Period, or if applicable, the Extended Marketing Period… ‘Class Action Settlement Amount’ means $2,200,000, which will be paid to the Class Action Claims Administrator pursuant to… the Plan following the Closing of the Sale or Transfer.” Bankruptcy records do not indicate whether a broker has been retained.

The property has been subject to at least four significant state and federal court cases. In the earliest, 111723/2011, filed October 14, 2011, tenants alleged J-51 rent overcharges.

According to the stipulation agreement in the 2011 case, “WHEREAS, on April 16, 2023, the Court of Appeals entered an order reversing the Summary Judgment Order; WHEREAS, the Court of Appeals held that: “Defendants’ deregulation of the apartments was based on [a] “misinterpretation of law” involved in Regina and therefore that conduct did not constitute fraud… WHEREAS, the Court of Appeals determined that: “for purposes of calculating overcharges, where it is possible to determine the rent ‘actually charged on the base date’ – here October 14. 2007 – that amount should be used and rent increases legally available to defendants pursuant to the RSL during the four-year period should be added” rather than the default formula provided for in the Summary Judgment Order…
“WHEREAS, the Plan provides for the sale (the “Sale”) of the Landlord’s ground lessee interest in the Property and the use of the proceeds from the Sale to, among other things, repay the amounts owed to Barclays on its mortgage, and to fund the Pool…”

In 2018, Koeppel filed a complaint against the fee owner of the property, Solil Management, which owns and manages the portfolio amassed by Sol Goldman. 154744/2018 alleging Solil Management was threatening to terminate the ground lease and refused to provide an estoppel, at the same time Koeppel was seeking to refinance the property. The ground lease runs to 2055. Koeppel ultimately did refinance the property in 2018, obtaining a $32 million loan from Barclays.

According to the 2018 complaint, “The Lease was for a ninety-nine (99) year period divided into an initial period of twenty-five (25) years, two option periods of twenty-five (25) years each and a third option period of twenty-four (24) years, ending in the year 2055.”

Then in May 2022, trustee for the securitized lender filed a pre-foreclosure, 1:22-cv-04326-VEC, and three months later, in August 2022, William Koeppel filed to place the property in bankruptcy, 22-22635-shl. The trustee in 2023 assigned the loan to Barclays, which had originated the debt in 2018.

The block

On this tax block, PincusCo has identified the owners of seven of the 19 commercial properties representing 317,170 square feet of the 423,637 square feet. The largest owner is Fortress Investment Group, followed by Katherine Cartagena and then Pinnacle Group. 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 William Koeppel, head officer and Harrison Koeppel, site manager. The business entity is Eastgate Whitehouse Llc.

The surrounding

Within a 400-foot radius of 943 1 Avenue, PincusCo identified eight commercial real estate items of interests occurred over the past 24 months. Of those eight items, five were sales above $5 million totaling $90.9 million. The most recent of the five was Kenbishi Sake Brewing Co. Ltd. which bought the 6,960-square-foot, eight-unit rental (C7) on 355 East 50th Street for $8.3 million from Michael Lohan and Andrew Vecchio on October 31, 2023. Of those eight items, three were loans above $5 million totaling $64.5 million. The most recent of the three was CBSK Developers in which borrowed $21.3 million from Metropolitan Commercial Bank secured by the 38,720-square-foot, 38-unit rental (D7) on 930 1st Avenue and two other properties on June 30, 2023.

Direct link to the property’s ACRIS page.