Joseph Beninati’s Bauhouse Group temporarily staved off a foreclosure auction of its 3 Sutton Place development site that was scheduled for Monday, after the entity that took out a loan on the property filed for bankruptcy last week.
BH Sutton Mezz LLC filed for Chapter 11 Friday, after a Manhattan judge denied Bauhouse’s request for a preliminary injunction that would have stopped Gamma Real Estate from putting the development site up for sale at foreclosure auction.
Gamma lent roughly $147 million on the site at 428-432 East 58th Street, which was recently appraised by Cushman & Wakefield as being worth nearly $270 million as-is, and over $1 billion if the 68-story, Norman Foster-designed luxury condominium project were completed. The developer subsequently defaulted on that debt in January.
But with the bankruptcy filing, Bauhouse succeeded in delaying the foreclosure sale sought by the lender. Gamma, led by Richard Kalikow, could pursue a motion to lift that stay, which if successful could enable it to proceed with the site’s auction.
It is unclear whether Gamma has already filed such a motion. If the lender were to avoid going down that route, or if its motion to lift the stay on the foreclosure sale were denied, the initiation of Chapter 11 bankruptcy proceedings could buy Bauhouse time to restructure and pay off its debts on the property, as Crain’s reported today.
But the move may also expose Beninati and his partners on the development to personal financial liability, according to Crain’s.
Neither Bauhouse’s bankruptcy attorneys nor representatives for Gamma returned requests for comment.
Stephen Meister, a real estate attorney who is representing Bauhouse in its separate legal complaint against Gamma but isn’t involved in BH Sutton Mezz LLC’s bankruptcy filing, said he recommended his client appeal the ruling that struck down the proposed injunction against the sale.
“Many judges would have granted that restraining order,” Meister said, adding that Bauhouse’s lawsuit against Gamma Real Estate will move forward “on a money-damages basis.” The biggest bone of contention, he said, was the extremely short window that Gamma and its broker Eastdil Secured gave potential bidders to vet the site, which Bauhouse’s lawsuit claims would make Gamma the only viable bidder.
“The two weeks that Eastdil and Kalikow worked out was total bullshit, as far as I’m concerned,” Meister said.