An article in therealdeal.com yesterday by Adam Piore said that Kent Swig maintains that his companies including Swig Equities are doing fine and that his empire has not "crumbled."
The article said that the 48-year-old developer "has been sued by more than 12 creditors, squabbling over a reported $50 million in personal debt" and that "his former Sheffield57 project is widely considered one of the biggest condo conversion fiascoes in New York City history," adding that "Fortress Investment Group purchased the debt on the property in 2009 for less than 40 cents on the dollar and won the right to foreclose."
"Just months after losing the property," the article continued, "a court ordered Swig to fork over $32 million in cash to Square Mile Structured Debt, which helped finance the failed conversion - prompting Swig to file an affidavit threatening to declare bankruptcy.
Meanwhile, in January, his real estate services firm, Helmsley-Spear, largely shuttered its third-party commercial brokerage operations, and laid off most of its employees. In July, Swig sold 140 William Street for $11.5 million - a 53 percent loss....And in October, he surrendered his equity and transferred the deed for yet another property - 5 Hanover Square - to the Manhattan-based real estate firm Savanna, which purchased the delinquent mortgage at a foreclosure auction."
"The golden-haired Californian acknowledges it's been a tough time - in addition to his money problems, his 22-year marriage to Elizabeth Macklowe is headed for divorce, and he had a major surgery last December.
Swig, however, offered what the article said was "an aggressively optimistic spin on his two years of business travails, and tried to make a clear distinction between his personal finances and those of the companies he owns. He also predicted he would pay off his personal debt "100 percent, plus interest" within the next 24 months or so. Income from his properties and his interest in real estate services firm Terra Holdings - which has continued to expand - will help him dig out of the hole, he said. According to court documents, all of his profits from Terra as well as income from most, if not all, of his other entities are being placed in escrow accounts under the control of New York City marshals, to be distributed to Swig's creditors."
Mr. Swig said that he and his former partners at Sheffield57, Yair Levy and Serge Hoyda, "still stand to share in the profits from both that building and Hanover Square, thanks to little-noted agreements he worked out with each of the property's new owners." He said he couldn't talk publicly about the arrangement with Fortress at the time of the foreclosure because the deal was too sensitive, he claimed. But last month he told The Real Deal that the negative headlines detailing the Sheffield foreclosure buried a key fact. He claims he recruited Fortress and asked them to buy the debt on the property and foreclose - then agreed to voluntarily hand over the condo plan, which allowed Fortress to avoid having to file a new one, a process that could take up to 15 months. In addition, Swig said, he also agreed to serve as 'the fall guy' in the press and that in exchange for his cooperation, Fortress granted him and his partners a share of any future profits, one that he characterizes as "enormous" and "a very significant stake."
An agreement between Fortress and Swig that The Real Deal obtained grants "Swig and his partners a share of the profits, but only after Fortress and its investors receive a 25 percent internal rate of return, and at a minimum, an equity multiple of 1.75 times their aggregate capital contributions. After that, Swig and his partners receive $7 million. Then they get a share of the subsequent profits that starts at 12 percent and rises to 49 percent, depending on how much money the Sheffield produces."
The article said that the 48-year-old developer "has been sued by more than 12 creditors, squabbling over a reported $50 million in personal debt" and that "his former Sheffield57 project is widely considered one of the biggest condo conversion fiascoes in New York City history," adding that "Fortress Investment Group purchased the debt on the property in 2009 for less than 40 cents on the dollar and won the right to foreclose."
"Just months after losing the property," the article continued, "a court ordered Swig to fork over $32 million in cash to Square Mile Structured Debt, which helped finance the failed conversion - prompting Swig to file an affidavit threatening to declare bankruptcy.
Meanwhile, in January, his real estate services firm, Helmsley-Spear, largely shuttered its third-party commercial brokerage operations, and laid off most of its employees. In July, Swig sold 140 William Street for $11.5 million - a 53 percent loss....And in October, he surrendered his equity and transferred the deed for yet another property - 5 Hanover Square - to the Manhattan-based real estate firm Savanna, which purchased the delinquent mortgage at a foreclosure auction."
"The golden-haired Californian acknowledges it's been a tough time - in addition to his money problems, his 22-year marriage to Elizabeth Macklowe is headed for divorce, and he had a major surgery last December.
Swig, however, offered what the article said was "an aggressively optimistic spin on his two years of business travails, and tried to make a clear distinction between his personal finances and those of the companies he owns. He also predicted he would pay off his personal debt "100 percent, plus interest" within the next 24 months or so. Income from his properties and his interest in real estate services firm Terra Holdings - which has continued to expand - will help him dig out of the hole, he said. According to court documents, all of his profits from Terra as well as income from most, if not all, of his other entities are being placed in escrow accounts under the control of New York City marshals, to be distributed to Swig's creditors."
Mr. Swig said that he and his former partners at Sheffield57, Yair Levy and Serge Hoyda, "still stand to share in the profits from both that building and Hanover Square, thanks to little-noted agreements he worked out with each of the property's new owners." He said he couldn't talk publicly about the arrangement with Fortress at the time of the foreclosure because the deal was too sensitive, he claimed. But last month he told The Real Deal that the negative headlines detailing the Sheffield foreclosure buried a key fact. He claims he recruited Fortress and asked them to buy the debt on the property and foreclose - then agreed to voluntarily hand over the condo plan, which allowed Fortress to avoid having to file a new one, a process that could take up to 15 months. In addition, Swig said, he also agreed to serve as 'the fall guy' in the press and that in exchange for his cooperation, Fortress granted him and his partners a share of any future profits, one that he characterizes as "enormous" and "a very significant stake."
An agreement between Fortress and Swig that The Real Deal obtained grants "Swig and his partners a share of the profits, but only after Fortress and its investors receive a 25 percent internal rate of return, and at a minimum, an equity multiple of 1.75 times their aggregate capital contributions. After that, Swig and his partners receive $7 million. Then they get a share of the subsequent profits that starts at 12 percent and rises to 49 percent, depending on how much money the Sheffield produces."
Architecture Critic
Carter Horsley
Since 1997, Carter B. Horsley has been the editorial director of CityRealty. He began his journalistic career at The New York Times in 1961 where he spent 26 years as a reporter specializing in real estate & architectural news. In 1987, he became the architecture critic and real estate editor of The New York Post.
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