Nov. 18 (Bloomberg) -- Anglo Irish Bank Corp. kept control of 232 unsold condominium units in Manhattan’s Battery Park City with an $82.8 million bid in a foreclosure auction yesterday.
There were no other offers for the units at 225 Rector Place, a failed project that the Dublin-based bank began to foreclose on in February 2009. Anglo Irish won’t necessarily hold onto the property, said Christopher Sullivan, a partner at law firm Herrick, Feinstein LLP who is representing the company.
“Its options are to sell the bid to a third party or take title and sell the property,” said Sullivan, whose firm is based in New York.
Anglo Irish, seized by the Irish government in 2009 after its real-estate loans soured, held the auction in an attempt to recoup $135 million it is owed. The lender was entitled to offer as much as that amount without having to commit any cash, a practice known as a credit bid.
If Anglo Irish sells its bid, the buyer would take title to the condos by the court-mandated closing date of Dec. 15, Sullivan said. The assets include the unsold condos, a 114-space parking garage and 2,000 square feet (186 square meters) of commercial space.
While representatives from Stephen Ross’s Related Cos. attended the auction, they didn’t make an offer. Mitchell Karlan, a lawyer for New York-based Related, declined to comment after the auction.
Once Ireland’s biggest publicly traded lender to property developers, Anglo Irish increased its U.S. loans sevenfold in the four years through 2008 to 9.3 billion euros ($13 billion). That was about 13 percent of its loans at the time, according to financial reports.
In 2005, Anglo Irish loaned to properties in at least 14 U.S. cities, including Miami, Chicago, Detroit, Los Angeles and Washington, according to New York-based property research firm Real Capital Analytics Inc. It backed at least $2.4 billion of Manhattan real estate deals from 2005 to 2009. They include the renovation of the Apthorp, a 12-story property built in 1906 with 163 apartments and a 117-car parking garage; the purchase of a Ralph Lauren store on Madison Avenue and 72nd Street on the Upper East Side; and a Holiday Inn on Lafayette Street in SoHo.
“There’s an internal debate within Ireland on whether to sell everything now or manage it over the next couple of years to maximize value,” said Ben Thypin, an analyst at Real Capital.
“The continued assumption of liabilities from failed banks in Ireland is making creditors, namely the European Central Bank, nervous,” Thypin said.
Ireland’s Bank Woes
Ireland is preparing to take a majority stake in Allied Irish Banks Plc, the country’s second-largest bank. Allied Irish and Ireland’s biggest lender, Bank of Ireland Plc, are becoming increasingly reliant on the ECB for funding. ECB loans to banks based in Ireland rose 7.3 percent to 130 billion euros in October from the previous month, Ireland’s central bank said on Nov. 1.
Steps taken to salvage Ireland’s banking system will widen the deficit to 32 percent of gross domestic product in 2010.
When Anglo Irish initiated foreclosure proceedings at 225 Rector Place, the company said in court papers that developer Yair Levy didn’t pay property taxes or contractors and failed to “complete the work needed to make the project safe and habitable.”
Levy, who turned the rental property into condominiums, has sold 72 of the 304 units in the building, according to the suit. No units have sold since foreclosure proceedings began, leaving more than 75 percent of the apartments empty, said Sullivan, the Anglo Irish attorney.
Rex Whitehorn, an attorney representing Levy and his company YL Rector Street LLC, didn’t return calls seeking comment.
New York Attorney General Andrew Cuomo filed a lawsuit in June against Levy and his company, accusing them of defrauding purchasers at the Rector development by “raiding” a $7.4 million reserve fund meant to be used for repairs and building improvements, according to a statement issued by the Attorney General’s office. A review of the project’s financial records by Cuomo’s office found that Levy used reserve fund money for personal and general business expenses, including making credit card payments and writing checks to himself and relatives.
Anglo Irish appointed a receiver to manage the building until a new sponsor takes title to the unsold units. The bank advanced “several millions” to the receiver to fix safety hazards such as exposed walls and wiring and to complete some of the amenities, Sullivan said.
“That money will never be recovered by the bank through the sale of the property,” Sullivan said.
The case is Anglo Irish Bank Corp. Limited v. YL Rector Street LLC, et al, No. 101796/2009, New York Supreme Court, Manhattan.
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