Good news for condo owners at Sheffield57, the alphanumerically-named midtown project that, over the past four years, has served as the backdrop for an epic war between buyers, rent-regulated tenants and its developers.
Kent Swig, the lead sponsor in the project at 322 West 57th Street, has reached a settlement with the condo owners who sued him, agreeing to pay the common charges he, as sponsor of more than 400 unsold condos, owes to the Board of Managers, according to legal documents obtained by The Observer. The settlement comes in response to a complaint filed by two Sheffield condo owners in Manhattan Supreme Court on May 4, in which they allege that Mr. Swig owed $5.4 million in unpaid common charges (Mr. Swig’s co-sponsors are Yair Levy, of ice-bucket-wielding fame, and Serge Hoyda).
“We don’t have enough money to pay our operating expenses on a real-time basis,” said Larry Wagner, one of two named plaintiffs, a condo owner and, it should be noted, a former CFO at Nomura (probably not one of the wisest people to tangle with). “Vendors are not being paid. Liens are being put onto individual units or unsold units. And certain vendors could stop doing business with the building because of the fact that they are not getting paid. This becomes a very tenuous situation because, at this particular point, we are in a deficit.”
Should the developers sell off the remaining condos in bulk, or in any way amend their mortgages, a stipulation requires that the buyer or lender repay the common charges. To be more precise, “[R]espondents will issue a written direction to the Purchaser or Lender, as the case may be, to issue, out of the proceeds of such loan or sale (as the case may be), a certified or bank check directly payable to the Board of Managers of the 322 West 57th Street Condominium in the amount of all common charges due and owning by the Sponsor to the Board of Managers…”
Of course, in order for this stipulation to be triggered, Mr. Swig must actually succeed in modifying his loans or selling the condos in bulk.
Mr. Wagner is part of the nine-member board of Sheffield57 Owners LLC, a group of nearly 100 condo owners who have been battling Mr. Swig on multiple fronts (including in the press).
On May 20, they sent a strongly worded letter to Attorney General Andrew Cuomo alleging that the “Sponsor has illegally misused the building’s reserve fund, failed to pay mandatory common charges on units they own for the past 18 months, failed to audit the last two years of finances, and made material alterations to the plans for the building’s common areas without publicly disclosing these changes.”
On Friday, May 29, condo owners met with members of Mr. Cuomo’s staff, Mr. Wagner said. They will have a follow-up meeting within 30 days.
Meanwhile, “We have been contacted by several interested developers and investors who are starting to do due diligence on buying out portions of those loans with the intent to foreclose and replace Swig as primary sponsor,” said another condo owner, referring to loans underwriting the development.
Mr. Swig declined to comment for this story.
drubinstein@observer.com
