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Sutton Place Developer Files for Bankruptcy as Foreclosure Auction Looms

A rendering of the planned Sutton Place tower shows the skyscraper towering over its surroundings.

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MIDTOWN EAST — The developer of a planned 950-foot skyscraper in Sutton Place has filed for bankruptcy as mounting legal challenges throw the tower’s fate into question, according to court documents filed on Friday

Bauhouse Group, which has spent more than a year laying the groundwork for the luxury residential tower the firm’s principal Joseph Beninati hoped to build on East 58th Street, declared bankruptcy in what appears to be a last-ditch effort to derail a foreclosure auction scheduled for Monday by Beninati’s lender. 

Gamma Real Estate, an investor to whom Beninati owed nearly $150 million, had planned to auction off the developer’s properties at 428, 430 and 432 E. 58th St. on Monday, according to Crain’s New York Business.

Beninati borrowed $147 million from Gamma in order to begin building his skyscraper, but was unable to get the project fully financed and defaulted on the loan in January, according to Crain’s. 

In addition to the loan from Gamma, Bauhouse owed substantial sums ranging from $49,000 to nearly $1 million to at least 20 other architecture, engineering, construction, interior design and marketing firms, according to documents filed on Friday.

The bankruptcy claim came at the end of a very bad week for Bauhouse. On Feb. 23 a judge tossed the developer’s request for an injunction that would have blocked Monday’s foreclosure auction, and on Feb. 25, JLL, a commercial broker, accused Beninati of illegally breaking a contract for a $1.9 million commission.

In a lawsuit filed on Feb. 25, JLL accused Beninati of taunting the firm and refusing to pay them the agreed upon commission its lawyers say it earned when it secured Bauhouse the $147 million loan from Gamma, according to court documents.

“We will do what we want— and if you don’t like it, sue us,” Beninati said, according to the lawsuit.

The bankruptcy claim has postponed the foreclosure auction for now, according to The Real Deal, but it’s not immediately clear for how long Beninati can keep it at bay.

Furthermore, while the move could give Bauhouse time to restructure and pay off its debts, it could also open up Beninati and co-owner Herman Carlinsky to personal liability and allow creditors to seize their personal property, including cars and homes, according to the Crain’s report.

Bauhouse Group’s Sutton Street tower has faced stiff opposition from neighbors since plans were announced last year. A neighborhood group, the East River Fifties Alliance, teamed up with several local and state lawmakers in January to file an application for rezoning that would impose a 260-foot height cap in the neighborhood to block future skyscrapers.

With the rezoning proposal filed with the Department of City Planning, neighborhood skyscraper opponents are more concerned with keeping the area free of any new tall buildings than who ends up in control of Beninati’s East 58th Street properties, according to the group’s president Alan Kersh.

“No matter what happens with the proposed megatower on East 58th Street, our vision remains the same: a residential neighborhood that grows in a smart, sustainable way,” Kersh said. “It’s the outdated zoning laws that allow developers to create these out-of-scale and contextually inappropriate supertall buildings and our plan will stop that from ever happening again in our residential community.”

Gamma Real Estate did not respond to several requests for comment on Monday, and a representative of Bauhouse Group has not responded to repeated requests for comment on Beninati’s legal troubles.

Article source: https://www.dnainfo.com/new-york/20160229/midtown-east/sutton-place-developer-files-for-bankruptcy-as-foreclosure-auction-looms

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