Group acquires $40 million note on planned apartment tower at 303 East 51st Street

HFZ Capital Group, a partnership of Tamir Sapir of the Sapir Organization, Ziel Feldman. Chairman of Polar Investments, and Acro Real Estate of Israel has acquired a $40 million note on the planned apartment tower at 303 East 51st Street from Arbor Realty Trust.

An article in today's edition of therealdeal.com by Avihu Kadosh said that "The original developer, Kennelly Development Company LLC, which is headed by James P. Kennelly, had invested more than $110 million for the defaulted project, according to sources."

In June, 2008, the Department of Buildings revoked the building permit for the tower under construction at 303 East 51st Street where a crane crashed and killed seven people in March. Work had been stopped at the site since the collapse.

A June 14, 2008 article by William Neuman and William K. Rashbaum in The New York Times said that "officials said that revised plans recently submitted by the developer did not resolve zoning violations that had led the city to question the project's status even before the crane accident on March 15."

Plans for the 117-unit condominium tower at 303 East 51st Street had changed. Initial plans called for the development site called for a 40-story building highlighted by pilasters but they were revised by architect Garrett Gourlay so that the tower would be 43 stories and clad in a "silvery" glass with many balconies, the fronts of which would be angled slightly differently to created not a fractured effect but one that adds a vertical dynamic to the facades.

"Residents in the area around the East 51st Street building where the crane crashed into the street had long complained about the planned 43-story tower being built by Mr. Kennelly," the Times article stated, adding "But it was not revealed publicly that the city also had reservations until after the accident when Patricia J. Lancaster, then the buildings commissioner, said that the project did not conform with zoning regulations and that it never should have received permission to be built as it was designed."

Ms. Lancaster would later resign because of the controversy.

"On May 20," the Times article continued, "the city sent the developer a letter, spelling out numerous ways that his plans did not meet zoning requirements, including problems with the configuration of the tower and how square footage was calculated. He submitted revisions, but the city said they were not enough to bring the building into compliance, which led officials to revoke the permit -- an action rarely taken on high rise projects in Manhattan."

Work has been stopped at the building site, at 303 East 51st Street, between Second and First Avenues, since the collapse.

Today's article indicated that 19 of the building's 30 stories have been completed and that it should be completed within a year and a half. The article also said that Ziv Yaakobi, the chairman of Acro, which is making its first investment in this country, said that it estimated that it bought the rights to the building at a 30 percent discount.

Kennelly Development's other residential projects included Block Hall at 21-23 South William Street in the Financial District, a recent conversion of a Tudor Revival-style former club building, and the Sycamore at 250 East 30th Street, a recently completed new condo apartment building.