Tessler’s 172 Madison Avenue Facing Foreclosure on $88M Loan
By Abigail Nehring August 23, 2024 3:48 pm
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A mostly empty Madison Avenue condominium tower, where Leonardo DiCaprio once rented a pad, was hit with a foreclosure case after defaulting on a $87.6 million mortgage.
Distressed debt investor ArcPe initiated the foreclosure proceedings Thursday after developer Yitzchak Tessler’s Tessler Developments evaded previous efforts to take over the distressed 12-unit luxury tower, according to the Manhattan Supreme Court proceedings.
Spokespeople for Tessler and ArcPe did not immediately respond to requests for comment.
The 34-story condo tower between East 33rd and East 34th streets was completed in 2017, and Tessler listed its most luxurious penthouse unit for an eye-popping $98 million.
Despite luring at least one famous renter to the property in 2018, there were no takers for the penthouse and the rest of the units were “drastically overvalued,” ArcPe Managing Partner David Gordon previously told The Real Deal. The tower remains mostly empty and at least some units are unfinished, Gordon told TRD.
ArcPe is now asking a judge to appoint a receiver to manage the building, among other relief, according to its filing.
Tessler Developments — the New York City real estate firm behind 240 and 260 Park Avenue South and the Bryant Park Hotel — took out the $87.6 million loan for 172 Madison in 2018 from Deutsche Bank (DB), according to property records and court filings.
The loan’s maturity date was extended twice before the debt was assigned to ArcPe in January 2024 through a Miami-based statutory trust managed by ArcPe.
The condo tower’s loan defaulted in March, with an unpaid principal balance of $43.6 million, according to the lenders’ notice of default. Including fees and interest, Tessler is still on the hook for $62.6 million in debt to ArcPe, court records show.
ArcPe attempted to recoup the debt by hiring Mannion Auctions to handle a Uniform Commercial Code auction set for June 6, according to court filings and TRD.
But two days before that, Tessler headed to bankruptcy court, filing for Chapter 11 in the Southern District of New York on June 4 and warding off the auction.
Now, ArcPe and Tessler will skip the quicker UCC foreclosure process — preferred by lenders — and the case will play out in court.
Abigail Nehring can be reached at anehring@commercialobserver.com.
