45 Park Place Under Construction with Financial Alert tag

May 24, 2021, saw three companies lead a petition to bring Park Place Development Primary, LLC — developer of downtown Manhattan luxury condominium 45 Park Place — into involuntary Chapter 7 bankruptcy.

Construction creditors are seeking over $25 million in nonpayment for work on the project, while the company’s lenders are attempting to foreclose over at least $117 million in defaulted debts.

Permasteelisa North America Corp., Construction Realty Safety Group, Inc., and Domani Inspection Services, Inc. led the involuntary petition after filing multiple mechanics liens and contract claims during 2019 and 2020, alleging that Park Place Development “is generally not paying its debts as they become due.”

According to its marketing, the property consists of “approximately 111,933 saleable square feet of residential space containing fifty residential condominium units,” as well as substantial space for retail and storage units. The project’s marketing touted “visionary” international collaborators, with interior design by Piero Lissoni and architectural design by Michel Abboud, alongside a plaza developed by Jean Nouvel.

Chapter 7 bankruptcy is generally known as “liquidation” bankruptcy, as it doesn’t allow for a structured plan of payment — instead, the debtor is required to sell off its non-exempt property in order to pay off its creditors, which can result in loss of property. As in this particular case, a group of petitioners may join together to initiate an involuntary Chapter 7 bankruptcy in order to secure the payment of debts.

Additionally including Trade Off Plus, LLC, S&E Bridge and Scaffold, LLC, and Ismael Leyva Architect, P.C., the petition claims a total of $10,223,885.50 in debts spread between the six companies stemming from the development of 45 Park Place.

The petition follows a prior suit by Domani Inspection filed on April 5, 2019, for its unpaid sum of $47,884.64, as well as a suit filed January 20, 2021, by general contractor Gilbane Residential Construction, LLC alleging $15,744,766.81 in debts on the part of Park Place Development.

Gilbane Residential was hired on March 15, 2015, to provide construction management services as general contractor of the 45 Park Place project, leading them to enter into subcontracts with Permasteelia North America, Construction Realty Safety, Trade Off Plus, and S&E Bridge and Scaffold.

A report by The Real Deal on April 30, 2019, stated that Gilbane Residential had not received any payment for its work in 2019, and had gotten only “minimal” payments for its work in 2018. Amidst this nonpayment, Gilbane Residential almost abandoned its work before being paid “close to $10 million.”

In a statement made at the time, Gilbane Residential said that it was “pleased to be building 45 Park Place to the highest industry standards and looks forward to continuing our work on this outstanding project.”

The individual declarations submitted by the six companies involved in the bankruptcy petition outline significant periods of nonpayment, with contractors sometimes having to stop work after letting Park Place Development fall more than eight months behind on payments.

Slow condo sales and financing struggles during construction hurt project development, slowed contractor payments

The project — located, despite its name, at 43 Park Place in Manhattan — has struggled mightily in the last number of years.

Similar to contractors’ issues with nonpayment, the project’s lenders — which include Malayan Banking Berhad, Intesa Sanpaolo S.P.A., WARBA Bank K.S.C.P., MSD Capital, and the Saudi Arabian Al Subeaei family — initiated a foreclosure action against Park Place Development on March 11, 2020, after it defaulted on its original $219 million loan. 

As of May 26, 2021, this action was still active. Court documents show that as of February 29, 2020, Park Place Development owed more than $117 million to its original lending group.

The specific nature of the loans needed for the project has created more hurdles. Real estate developer Sharif El-Gamal — owner of the 45 Park Place project — practices Islam and has prioritized compliance with murabaha in the project’s loans. Murabaha is an Islamic financial structure which does not allow lenders to charge interest, which led to El-Gamal working primarily with foreign lenders on the project.

In early 2019, El-Gamal sought an additional condo inventory loan of nearly $200 million on top of the project’s original $219 million.

However, as the project has gone through the financing and construction process, demand for luxury apartments has dropped in New York City. According to a 2019 offering plan for the location, apartments were priced over $3,000 a square foot — which, as luxury realtor Olshan Realty noted, was notably higher than the average $2,788 a square foot for residences even in Manhattan’s trendy Tribeca neighborhood.

The original sellout estimate for the project  — the amount of money expected to be received for the sale of all of the building’s units — was listed as $391 million. However, the 2019 offering plan noted a new estimated sellout of $408 million.

“It’s just a really hard market if you can’t wait around,” said Chief Executive of Olshan Realty Donna Olshan.

David Karson, executive managing director for the financial group of real estate developer Cushman & Wakefield, noted the difficulty of selling luxury condos like 45 Park Place: “This is $4,000-a-foot type stuff, and this is the part of the market that’s really slowed down a lot.”

In April 2019, the 45 Park Place project had only sold 11 of its 50 residential units, leading to marketer Corcoran Sunshine withdrawing all of the project’s other listings.

El-Gamal framed this as intentional and strategic, noting that “That was a strategy that we have with Corcoran Sunshine.”

“People aren’t buying off floor plans,” El-Gamal continued. “[Corcoran Sunshine] said, ‘let’s get your building done and get people in through the door.’”

El-Gamal blamed further outside issues when assessing the project’s problems.

After subcontractor Parkside Construction was removed from the site in May 2019 following an indictment for fraud, El-Gamal claimed that “There was work that was imperfected” which caused Park Place Development to miss payments to Gilbane, adding that “[such events have] a whole trickle effect.”

Additionally, a June 2020 lawsuit filed by El-Gamal against Malayan Banking Berhad sought more than $245 million as it alleged that Malayan Banking and other lenders “ignored and breached their obligations under the building facility and related loan documents,” causing “irreparable damage to the plaintiff’s relationship with its contractor, leading to a cessation of all work.”

Amidst these disputes, a report from the New York Yimby on October 1, 2020, noted that the 45 Park Place project had remained dormant since the end of 2019, casting doubt upon the state of the project.