9th & 10th Street LLC, which owns a Chesterfield condo complex development in New York City, filed for Chapter 11 bankruptcy recently seeking shelter for its sole asset while it pursues litigation against the city, former Mayor Bill de Blasio, billionaire Aaron Sosnick, and others.
The case will be overseen by Judge David S. Jones of the US Bankruptcy Court for the Southern District of New York. He has not yet scheduled a first day hearing.
The company
According to the declaration of Gregg Singer, president of the debtor’s manager Sing Fina Corp., the disputes underlying the case stretch back over a decade to a “hunch of impropriety.” He claims that the parties named in the litigation tortiously interfered with the debtor’s efforts to renovate their existing building, for those individuals’ political and personal gain. He claims the ultimate end was to allow the city to reacquire the property so it could be turned over to Sosnick.
“These efforts have stymied the Debtor’s efforts to develop the property, resulted in hundreds of millions of dollars in damages, caused a historical building with opportunity and potential…to lay fallow and fall into disrepair, and risk the loss of the Property to a mortgage foreclosure sale,” the declaration says.
The property is a five-story building built in 1906, which was operated as a public elementary school from 1907 to 1977. It has 152,075 rentable square feet. The debtor purchased it from the city in 1998 at a public auction, with a deed restriction for community facility use. Singer’s declaration claims that at closing, it had a monthly tenant who was illegally subleasing rooms and collecting tens of thousands in monthly profit while allowing the property to become “a hotbed of illegal activity.” Evicting that tenant took until 2001. Singer claims that efforts to rent to nonprofits and other community groups were smothered by a city council member, Margarita Lopez. In 2005, Singer’s declaration says, the property intended to develop as a college student dormitory while preserving the original public-school façade.
The debt
The debtor’s liabilities arise almost entirely from its mortgage loan. The debtor has not yet filed a top 20 unsecured creditors list.
The descent
The building’s struggling history constitutes a series of failed attempts to develop, expand, and lease out the property. Singer’s declaration often ties those incidents, including last minute rule changes and rejections by city agencies such as the Department of Buildings, to parties tied to Sosnick and specific New York officials. For example, the declaration says the initial development effort was halted under a rule change.
In 2006, the property was “landmarked” by New York, in a deal Singer says was negotiated by a Sosnick firm between Councilwoman Lopez and then-mayor Michael Bloomberg. In 2008, the East Village was “downzoned,” again in a change Singer ties to Sosnick. Those changes, Singer says, prevented the debtor from adding any square footage though it had acquired 100,000 square feet of additional development rights. In the following years, the debtor struggled to develop the building and acquire tenants amid shifting permits and rule changes, with multiple leases being signed but never executed. The day after one such lease was terminated in 2017, de Blasio announced the city was interested in buying the property and should never have sold it. Singer claims no offer was ever made, and the announcement served only to send a chilling message to would-be lessors.
The debtor then spent years conducting its own investigation into those “who appeared hell bent on destroying the debtor and its plans for any use of the property at all cost.” That included public information requests, engaging consultants and attorneys, and more. The debtor sued the city, the Department of Buildings, de Blasio, and others in federal court in 2018 but the litigation was dismissed.
In June 2020, however, after receiving more documents, it sued again in state court for tortious interference – that suit remains pending and seeks an estimated USD 82.5m in actual damages plus USD 26.8m in lost cash flow. Singer also accuses Sosnick and Michael Rosen, founder of the East Village Community Coalition nonprofit, of running a “sham front” for their private interests that is itself guilty of mail and wire fraud in its lobbying against development of the property.
The Chapter 11
The debtor aims to use bankruptcy as a shelter to continue prosecuting its lawsuits, hoping to stave off foreclosure and hang on to the property. Singer’s declaration provides no detail on how it aims to execute that, or whether it aims to pursue a plan or might consider a sale. The debtor is still working with lenders, targeting a restructuring or a refinancing.
The advisors
