A planned 900-foot-high condominium tower, a modernist showpiece designed to rival the tallest new Midtown Manhattan residential skyscrapers, landed in bankruptcy court on Thursday amid a slowing luxury market.
Developer Joseph Beninati’s Bauhouse Group put the project into chapter 11 bankruptcy on Wednesday to try to halt a foreclosure after he was unable to find lenders to refinance short-term loans the group used to acquire land and air rights for the tower on East 58th Street near Sutton Place. Construction has not started.
The developer was seeking to block an effort by an investment firm controlled by real-estate investor N. Richard Kalikow from foreclosing on the development. The project faced opposition by local officials and worries by lenders about the increasing risk in financing high-end residential towers.
The bankruptcy of the Sutton Place project, and the slowing demand for condos in super-tall Midtown towers on and around West 57th Street, signals a broader unease among banks and other lenders about financing luxury development. But it also shows how the market can be unsparing for developers without deep pockets or a strong track record in creating these enormously complex buildings, development experts said.
The Midtown area has set new benchmarks for Manhattan real estate, including a $100.5 million sale on West 57th Street, sometimes known as Billionaire’s Row. But during the second half of 2015, this portion of the market began to cool as the number of slender towers on the market rose and economic turbulence in much of the world made wealthy international buyers wary.
During a Thursday hearing in U.S. Bankruptcy Court in Manhattan, lawyers for Mr. Kalikow’s investment vehicle asked Judge Sean Lane to dismiss the bankruptcy, which they have called a “classic bad-faith filing” intended to thwart foreclosure. Court papers show the lender is owed more than $170 million, including interest and fees, a figure that is growing by $2.67 million a month.
This WSJ article I’m quoting from describes Beninati’s collapse as a bellwether of looming disaster, and it may be right: when Joe turns up on the scene, the party’s over, as The New Yorker’s Nick Paumgarten noticed when he visited Greenwich in 2008 and reported on, among other characters, Joe Bennati and his partner Jim Cabrera in a piece, “A Greenwich of the Mind” , which was appropriately subtitiled “What happen when the downturn got up market?”
Here’s Paumgarten’s assessment of just one of the Antares Boyz failed projects, the huge pile of rock off Langhorne Lane:
In recent years in Greenwich, as elsewhere, many developers have made a great deal of money buying up empty lots or teardowns and building enormous speculative ready-to-occupy mansions. You see them everywhere, a proliferating clan of insta-mini-giganto luxury houses, modest at ten to fifteen million dollars apiece. Their banal extravagance both mitigates and exacerbates what people either too rich or too poor to live in such houses would consider their tackiness.
Lake Carrington is enormous and speculative but not quite occupant-ready. It was framed out and drywalled but otherwise unfinished: no bathroom or kitchen fixtures, no moldings. The floors are plywood. It is a husk. To move in, a buyer would need to put in an additional five to fifteen million dollars’ worth of work. The developers’ name for this situation was “couture-ready,” the stated theory being that the buyers, whoever they might be, would want to customize the guts, but not the shell, to their taste.
Another way of looking at Lake Carrington was that it was a Potemkin manor, a movie set, not as much a dream house as a house in a dream. The developers, in a booklet promoting the property, which was known around their office as “the Bible,” had described it as “Gatsby-esque,” inadvertently summoning up the pretense and the tragedy, rather than the grandeur, of West Egg. The Bible featured stock photographs of polo players, vintage-car grilles, little girls blowing cattails: a Greenwich of the mind. The house was, in one sense, an entirely superficial confection of Greenwichness, and, in another, a canny apotheosis of it. Lake Carrington went on the market in April, 2007, listed at twenty-eight million dollars.
“Potemkin manor” is an apt description of all that these two individuals achieved, and the NYC broker who’s still suing Bennati for stiffing them on their commission for Sutton Place would undoubtedly say that the sham continued across the border.