THE REAL TROUBLE for the Apthorp came in the first week of December. Apollo, one of the lenders, made a $22.7 million capital call and demanded that Mr. Mann submit a new business plan for the project. “I send new ones every week,” Mr. Herbitter complained Monday. “They’re very arbitrary.” Had the world economy not tanked, he offered, “Apollo wouldn’t be losing the money they’re losing and have to focus on minutiae. ‘What toilets are we putting in?’ they asked one day. It’s ridiculous! Toilets!”
Mr. Mann responded to Apollo by threatening a lawsuit. If “you do file,” Apollo’s counsel wrote, “all bets are off and this project will quickly spiral down the toilet.”
He filed his suit anyway, asking for “an amount no less than Five Hundred Million” and accusing the lender of demanding a ransom payment and trying to get the Apthorp at a “fraction of its worth.” The suit, which misspelled screenwriter Nora Ephron’s name in its list of past Apthorp residents (“Norah Ephron, Al Pacino, Conan O’Brien”), even though she wrote a famous piece for The New Yorker on her life there, was quickly dropped.
Mr. Leviev’s people were livid. They sued to get Mr. Mann to agree to enter arbitration over management, which was, they said, an attempt to avoid foreclosure and save the Apthorp. Besides anger over Mr. Mann’s business plans, and besides those charges about the penthouse and ninth-floor units, they complained about an amateurish and embarrassing marketing campaign, especially a film about the building. (A segment of the movie is still on the building’s Web site, and features strings out of late-’70s pornography and a woman purring, “The Apthorp: A moment of passion that lasted a hundred years.”)
“The film was done at a time when the market was different; the market was sexier,” Mr. Herbitter explained.
More importantly, they complained that Mr. Mann had allowed excessive vacancies, and then had to lease the empty units at fire-sale rents after realizing that the so-called warehousing violated rules from the attorney general’s office about condo conversions. “Yes, we did create inventory!” Mr. Herbitter explained. “There’s natural attrition. People left. And in some places we didn’t lease them out so I could sell them!”
Then there was the charge that Mr. Mann was “overpaying for certain renovations while neglecting others.” According to a sales brochure, the Apthorp—known for its old-school grandeur but a sort of professorial untidiness—was going to have units outfitted with onyx in the powder rooms, for example, or hand-cast lion-head spouts. Even in the bubbliest market, those might not have been the ideal choices; a building known for its periodically murky tap water—“A few days ago we had brown water for 12 or 15 hours,” said Mr. Smith of the tenants’ committee—might not bother over hand-cast lion-head spouts.
Though the condo units won’t be getting lion-head spouts after all—“We’re not renovating many of them,” Mr. Herbitter said, “we’re selling them now as is”—there are still plans to construct an all-new central air-conditioning system. As it happens, the new cooling will not extend into the rent-stabilized apartments. “Well, as in any occupied conversion, the benefits accrue, for the most part, to the purchasers. The rent-stabilized tenants have their rights, so they get to stay there and get some improvements,” Mann’s president said. “But something like the central air-conditioning? No.”
Finally, among other things, the suit said Mr. Mann had unilaterally decided to replace the building’s third-party construction manager with one connected to his business partners.
“That has not happened,” Mr. Herbitter said. “There is a proposal for that. But it has not happened.”
ACCORDING TO Mr. Leviev’s investment agreement with Mr. Mann, the parties can solve stalemates by finding a mutually agreeable rabbi from a court known as a beth din, or house of judgment, to arbitrate their case.
But there were problems with finding a rabbinical court. First, Mr. Mann’s side didn’t think there was any technical stalemate: “But that doesn’t stop them from trying to push their agenda,” Mr. Herbitter said.
Then Mr. Leviev’s side recommended the orthodox Beth Din of America. According to court transcripts, Mr. Mann’s lawyer cited online research about that court “which gives us pause and concern; namely, an article that appeared online and a quote.”