Disaster at the Rushmore

Rushmore and Aldyn will not compete. Rushmore is clearly targeted at the high end and Aldyn at the low end. The Aldyn has lower floors reserved as rentals and considering the unit sizes, they may well intend to lease some of the condos they don't sell. Also the amenities are shared with Ashley. Seems like the Aldyn will be studios, one and two bedrooms geared for 20/30 somethings while the Rushmore goes for the crowd with more money and in need of bigger space and more private amenities.

Whats Rushmore at 50% these days. Any word on the a.g. suit? Was it settled privately or still on the docket?

spin: it does seem about right on a psf basis. 14B sold for $1400 psf. The much smaller 12N just closed for about $1300 and the much larger combo 16KL closed for $1432 psf. Doesn't matter if it was arms length or not, the new buyer paid going rate for the building. Not good news for early buyers.

Who knows what the Aldyn will be charging for their condos. But the rentals there will compete with the rentals at the Rushmore which will discourage investors particularly in the next few years as you get into year 5 and 6 plus in the abatement plan. The current 3 Bed rental at Rushmore dropped from 12,000 to 10,800 after a year on the market and is still not rented. The one bed is 3600 ask. What are the prices at the Aldyn? And, if 2 bed condos are going for $1.6 million at the Rushmore, don't you think a plethora of lower priced 2 beds condos at Aldyn will drag down Rushmore 2 bed prices. Could we be seeing $1000 psf in a year at the Rushmore?

Aldyn will tough competition for 120 RSB and Avery especially. I don't believe the Aldyn will be geared to three bedroom unit. People looking for one bedrooms to own or rent will be very attracted to the gym they are building under-ground.

Apt23, The folks @ Extell & Corcoran are savy enough to recognize the need for Aldyn to attract different buyers than Rushmore which still has plenty of units left.

This series does as good a job as any at tracing the outline of the market of the last couple of years.

- Three early closes at high prices in the early to mid stages of closings in the building. I take these to be pre-Lehman contracts where the buyers decided to go ahead and close (vs. forfeit deposit) a year into the bust
- Two late 2009 / early 2010 trades with significant developed price concessions
- Two subsequent 2010 trades at progressively higher prices, although still well below the early closes. Progressively higher floors as well, so that will be some of the increment

09/08/2010 #12N $1,603,743 -8.4% $1,750,000
04/08/2010 #10N $1,574,614 -10.0% $1,750,000
02/11/2010 #8N $1,405,185 -17.3% $1,700,000
12/30/2009 #11N $1,514,646 -13.4% $1,750,000
12/10/2009 #16N $1,904,127 +1.8% $1,870,000
09/18/2009 #14N $1,781,937 -1.0% $1,800,000
09/01/2009 #9N $1,731,025 +1.8% $1,700,000

I was just looking at the three penthouse units that closed at the beginning of the summer. The first and third are May/June 2010 contract dates and closed at 10-12% below ask. The other is a Nov 2009 contract date 21% below ask for the highest floor of the three. This is a tiny sample but more evidence that the developer has been able to back off the price concessions in 2010.

06/28/2010 #PH4B $6,109,500 -10.2% $6,800,000 5 beds 4.5 baths 3,072 ft²
06/28/2010 #PH5A $5,439,899 -21.2% $6,900,000 4 beds 4.5 baths 3,056 ft²
06/28/2010 #PH2B $6,109,500 -11.8% $6,925,000 5 beds 4.5 baths 3,072 ft²

More general question: if the premise of the "disaster" in the title of the thread is that rent vs. buy is way out of whack for this building (indisputable) and that a correction is coming (one would think), when have so many units sold at out-of-whack prices that the disaster in question is no longer the developer's disaster but has really been put off on the purchasers collectively? I count 146 closings, excluding the commercial unit and a couple of resales (bad outcome for one seller, benign for the other), so they are just past 50% of the 289 units (which may be whittled down a bit by combinations). Given where prices have held, this is not yet a disaster for the developer. On the other hand, there is still a long way to go.

Let me get this right. Mortgage rates have gone down enouh in the last 2 yrs to bump up prices by 20%. But rushmore units are selling for less over the last two yrs and this is 'posiive'?

I guess enough financial nimwits decided with the lower payments their option cost went down enough to bleed monies slowly and pray than take the hit now. Flmaoz.

If your point is that there appears to be a lemming infestation at the Rushmore, then I agree. Some rich lemmings too. Better than roaches or bedbugs anyway. My only point is that if Extell gets the damn thing sold it's no longer their disaster but rather a question of how far down is the bottom of the cliff that the lemmings ran over.

Someone buying a 5 million dollar apt, isn't thinking about the rental alternative.

How would you know? You tube?

Really? Rvsder? Never seen a flipper buy a $3mm condo, try to rent for $25k month.... Thinking their cash flow bleed will be cauterized by a sale to a crazier lemming for $3.5mm in two years? Keep adding $1mm every year, yep the birth of the $10mm flip. Flmazo.

"Someone buying a 5 million dollar apt, isn't thinking about the rental alternative."

Who then, pray tell, is the target for 318 $12.5K+ rental listings on SE at the moment?

When someone rents out a five million dollar apt, it's not typically a first choice....

Who in their right mind wants to rent to exposed themselves to 5 million dollars of principal risk in order to get 150k a year in income (less expenses)?

columbiacounty Ignored comment. Unhide

You got erased from last nite.

Back again?

Why bother?

columbiacounty Ignored comment. Unhide

You're a definite show stopper.

Happy?

columbiacounty Ignored comment. Unhide

the Rushmore dramatically slashed prices this weekend - some units dropped over 20%. That would signal a disaster for the developer.

"Who in their right mind wants to rent to exposed themselves to 5 million dollars of principal risk in order to get 150k a year in income (less expenses)?"

I'm pretty sure the buyers view it as an investment. Maybe they get $200K, less expenses. Just look up a few of of them on SE, you'll often see the places go straight from a purchase to a rental. I see it all the time.

How is this any different than the place purchased for $2M and then rented for $80K, less expenses? Same concept, higher price.

Good catch, KBL. It looks like they're pricing them closer to market finally. For example, 15M sold for $4.333M:

http://streeteasy.com/nyc/sale/497721-condo-80-riverside-blvd-lincoln-square-new-york

And 14M got chopped down to $4.435M:

http://streeteasy.com/nyc/sale/528447-condo-80-riverside-blvd-lincoln-square-new-york

You gotta figure they're expecting a haircut off that number, but they just have to chop. They've been flogging the sales for 4 years now, nearly half of which was during bubble times. Doubtful they want to drag it out another 4.

So the ruling came in. Extell's contention that they would be a hardship to sue all the individuals in they won on appeal is lame and alarming. This is a litigious company. The fraud of altering the docs has held up with the AG;s office. If you buy in an Extell building --good luck to you if you ever have a problem. This is clearly an anit-consumer kind of company

http://therealdeal.com/newyork/articles/court-of-appeals-upholds-ruling-that-extell-development-carlyle-realty-partners-must-return-deposits-to-rushmore-buyers-gary-barnett

Apt23. It's fairly obvious that Extell has instructed its lawyers to argue their case regardless of cost or strength of position. This is the best their lawyers could do and the judge ruled against them. Unfortunately (or fortunately) we have due-process and appeals. It sounds like Extell is appealing without any consideration of their chance of success(maybe to buy time). They will have to return the deposit. I can't see them actually going through with suing individual buyers, they were just arguing the hardship of the strategy and hoping beyond hope the judge would agree.

There was a NY Mag article quoting Barnett in another law suit where he basically said bring it on, he's got more laywers, more money, and more lawyers. Guess that's his MO. Expect Barnett and Ahuva to appeal for the sole purpose of dragging out the case with a side of contempt for the law and pure vindictiveness.

http://nymag.com/news/features/establishments/68503/index3.html

Odd P.R. move.

THE real estate world is littered with the corpses of over-leveraged developers.

Riversider: It is odd. You would assume that the first buyers in got the pick of the litter in terms of choice apts. And, of course, they were hefty prices. You would think that given the hard push at sales and marketing to foreign buyers while they appealed the court case, they would want to have their best inventory to unload on the foreign buyers. If you account for time, falling prices, the huge cost of litigation, etc it would seem that if they sold those 41 apts that are in contention at even 25% discount several months ago --with no added litigation costs,--they would be way ahead of the game. Plus, factor in the bad PR of developer suing the buyers as you are viewing apts.

No, I would not assume that. Typically the units are released in tranches. What wsa different here is that they started at full price. Usually developers offer the first slice at a discount to generate good feeling and press.

Apt23 - Extell HAS BEEN SELLING the 41 apts in contention. As they sell the units, they cancel the existing buyer's contract and send them a nasty default notice letter. They've been having their cake and eating it too.

And to my earlier...I guess they can only find so many idiots in Korea/China/India etc where a lot of these foreign buyers are coming from since the building has been in sell mode for 4 years now.

They're probably hedging their bet. if they resell the apt, the most they can do is enter into a plenary action for the difference plus costs. They may also be trying to scare existing buyers into honoring their contracts more than actually collecting the difference. Kinda interesting they didn't sell Aldyn pre-construction and maybe more interesting the building is now completed with no offering plan approved by teh A.G..... This may not be a coincidence. Can you see the A.G. approving Aldyn while Extell refuses to abide by teh A.G.'S decision on Rushmore?

Streeteasyfan, They are selling to the chinese, koreans & indians, not because they aren't smart, but in those famous words.. because "that's where the money is"

There's plenty of money in NYC, but they aren't selling many to residents here. They are selling there because that's where the dumb money is. They haven't heard about the suit, they don't disclose it, and they lie about how many units are sold.

don't care much for your characterization, but it is true that foreigners are typically the least knowledgable about a local market and people in those countries have a sensibility that real estate is a better investment long term than stocks, bonds, cash or money in the bank.

U.S. Court of Appeals has ruled that the developers of the Rushmore, a West Side luxury condo building, must return about $16 million in deposits to 41 buyers, one of the largest refunds ever ordered.

The ruling is a setback for the developers, a partnership between Extell Development Co. and Carlyle Realty Partners, which stand to lose more than $100 million in apartment sales. Most of the sales affected by the ruling were made near the peak of the market and the developers aren’t likely to sell units at those prices again.

Extell president Gary Barnett could not be immediately reached for comment.

Under state regulation, a condo developer is required to start closing sales by the end of its stated budget year. In the Rushmore’s offering plan for the 275 units, that date was listed as Sept. 1, 2008, and the first closing didn’t occur until February 2009.

The developers have said the date was intended to be Sept. 1, 2009, and that the documents contained a trivial clerical error. Attorney Richard N. Cohen, who represented a group of buyers, argued that the contracts need to be enforced as written.

The judgment affirms a district court ruling in May.

http://blogs.wsj.com/metropolis/2010/09/30/rushmore-developer-ordered-to-refund-millions-in-condo-deposits/

WTF? Rvsder? Yeah, the japanese bought rock center at the last peak. Very very smart move as you say. Flmaoz. How do you look at yourself? You've got to be the dumbest financial advisor ever on SE. And that saying alot given ericho.

NOT OVER!!!!
http://www.law.com/jsp/article.jsp?id=1202472766042&Condo_Buyers_Win_Round_in_nd_Circuit_in_Bid_to_Exploit_Law_Firm_Typo

But the litigation is not over, despite the decision by the 2nd U.S. Circuit Court of Appeals, which upheld a lower court's refusal to grant an injunction that would have blocked the release of some $16 million in buyer deposits from an escrow account maintained by the project developer and Stroock client CRP/Extell Parcel I.

John A. Coleman Jr. of Friedberg Cohen Coleman & Pinkas represents buyers of 33 of the 41 units in the project. He said there is no indication the sponsors are ready to instruct Stroock, which maintains the escrow account, to release the monies.

Boies Schiller has indicated it will seek a rehearing en banc, Coleman said, and it was possible the firm could seek a petition for a writ of certiorari from the U.S. Supreme Court.

"I think their chances of getting either are rather small," he said.

Stroock, he added, has filed an interpleader action in federal court seeking the court's direction on what to do with the monies.

Marc Held of Lazarowitz & Manganillo represents two buyers, one in the case before Daniels and a second in a state case in which he named Stroock as a co-defendant, charging fraud and third-party malpractice. The firm also was named for its role as escrow agent in the case, Coffey v. CRP/Extell I and Stroock & Stroock & Levan, 114073-2009.

"The Second Circuit got it right, there was no basis for an injunction and hopefully, the developers will do the right thing and return all the money to those who were under contract," Held said.

"Boies Schiller has indicated it will seek a rehearing en banc, Coleman said, and it was possible the firm could seek a petition for a writ of certiorari from the U.S. Supreme Court."

If the Supreme Court fails, I heard they might consider amending the Constitution.

Barnett is clearly his lawyers who must surely be advising against the action. I have not heard that Carlye is backing any of the newer buildings(Aldyn, etc). Could be desperation.

Barnett is clearly pushing his lawyers who must surely be advising against the action. I have not heard that Carlye is backing any of the newer buildings(Aldyn, etc). Could be desperation.

Inonada--..If the Supreme Court fails, I heard they might consider amending the Constitution.

Ha!. Sounds about right. But great PR right? Their tag line on their buildings should be "We will squash you like a bug".

And, Kinda makes a potential buyer even more inclined to do business with Extell.

It gets more bizarre with every ruling. Makes me think that Extell is using these "sales" in the count of sales to prevent loan covenants from triggering.

Apt23, what do you know on the Carnegie 57 project? Is it being built?

Clearly reputational risk is not a chief concern.

Hey Gary - I want to make an appointment for Saturday to look at your apartments. If I like them, I might offer you 50% off asking price - you pay the closing costs you SCUMBAG!

When I signed a contract for a new construction condo in 2007 (not with Extell) it had a provision that losing party pays attorney's fees for any litigation related to the purchase agreement. I wonder if the Rushmore contracts had a provision like this. I would love to see Extell have to refund deposits and write the plaintiffs a check for their attorney's fees. There is nothing worse in business than a sore loser.

Ino: Well, Barnett "says" Carnegie 57 is being built. There were construction crews there last week. But it doesn't look like they are doing anything above grade yet. And there is a crane there. I don't know much about big construction but to me, it doesn't seem like it can be a tower crane because it looks a tad paltry for the tallest residential building in the city. I wonder if he has the construction loans in place. They were not in place in August when he last talked about it to the press. Another reason that NY Mag piece was a pathetic puff piece.

Perhaps it is just a case of logistics. When an Orthodox Jew partners with devout Muslims, there are very few days that can be counted as non-holiday. If they took on a Christian zealot as a partner, there would be about 50 work days a year -- excluding weekends of course.

Money, the one thing all religions can agree upon. I'll give organized religion one thing, unlike politicians they only have to deliver after you are dead. Pure genius!

Here, plaintiff-appellant has failed to make the required showing because it has adduced nothing more than conclusory assertions in support of its claim that one or more defendant-appellees might "spend" the escrow monies and later become insolvent. To award relief based upon these purely speculative allegations would push the standard for injunctive relief beyond its reasonable limit. In order to show a likelihood of irreparable harm, the plaintiff must provide some substantiation for its claims—the harm must be imminent before a court may issue injunctive relief. Because plaintiff-appellant has failed to establish that the harm at issue in this case is anything more than a possibility, we cannot say that the district court abused its discretion in denying preliminary injunctive relief. Absent a finding of error regarding the district court's conclusion on irreparable harm, we do not reach plaintiff-appellant's likelihood of success on the merits.

http://www.leagle.com/unsecure/page.htm?shortname=infco20100930144

Who has the power to force Extell to pay these 41 people, rightfully, their deposits? It doesn't seem that anyone has the power to set a limit on the protracted, outrageous time this has taken.

Cannot be an accident that the A.G. has yet to approve the Aldyn's offering plan. There's your pressure right there.

Riversider: I assume that is just your supposition re AG withholding/ delaying approvals for Aldyn. But if there is any inkling of truth to it -- and really, why would you go out of your way to piss off the AG office--then Extell's actions are even more remarkable. They have a major investment in Riverside Blvd and are going to require both govt and community support to fully execute their plans. Really, a PR disaster.

apt23 http://streeteasy.com/nyc/talk/discussion/22928

Apt23, Correct pure speculation, but consider Fall is the seasonally the 2nd best time to offer apartments and no plan is approved. They're "showing apartments" only.. and the website says Sept 2010 is the anticipated opening.
The building has been completed and empty for some time.... who knows?

It seems that a very important aspect has been overlooked, that is, the situation of Strook and Strook. There was clear waffling when the judge asked the extell lawyers to produce proof of a typo -- something to the effect that it put strook in a difficult position. Sure it does: If Extell loses, Barnett takes it out of Strook's hide. It is a zero sum game for Strook. They will end up paying the $16 million, one way or another, unless they show it was never a typo as asserted in open court. If it was a typo, then it's malpractice -- so why shouldn't they fight it back to the founding fathers, if they could? Not that Barnett isn't cheering them on...but can he overrule his own lawyers and then turn around and say, make me whole for $16 million. they would no doubt respond, heck, we can win this thing...gimme one more chance...what does Strook have to lose by pushing the appeals?

ml....if Barnett loses he can be expected to explore any and all options including going after Strook, but Strook may very well argue they passed the document back to Extell for review and that Extell had ample opportunity to spot the error if it was an error. Maybe Strook will even argue they were following Extell's wishes or believed this was the date Extell wanted....

bds - The courts have the power to force Strook. In fact, Strook has filed what's called an "interpleader" action with the court. An interpleader action is used when a party (in this case Strook) is holding money but doesn't know what to do with it. As Escrow Agent, Strook is supposed to release the money to Extell if a buyer does not live up to its obligations and release the money to the buyer if Extell does not live up to its obligations. Since Extell may argue that it will now sue each individual buyer (that is, in part, what the latest court decision said), Strook essentially throws up its hands and says "Court, you decide" - and as long as Strook does what the Court says, then Strook isn't liable for breaching its duties as Escrow Agent. Law firms have a very high duty of care when they hold money in escrow. Keep in mind, this says nothing about Strook's liability (or lack thereof) as attorney for Extell vis a vie professional malpractice for the (alleged) typo.

After the AG's ruling there were some interviews with the buyers' attorney who indicated that there were papers that the AG reviewed that indicated that the 2009 was unquestionably NOT a typo. The gist of his comments was basically that after reviewing those papers the AG had not other alternative but to find in favor of the buyers. The attorney was rather reserved in his remarks considering he was on the winning side.

Yet, every subsequent remark from the Extell lawyers continues to harp on the typo. It seems they are bearing witness to the dictum, "Say it enough times and it will become true". Perhaps this continuing litigation is a ruse so they can continue to sell apts using the excuse that it is all a small contretemps over a typo. It might be harder to sell apts if you are buying from a man on the losing side of a fraud case.

And, Marc Held, the lawyer for two of the buyers is going after Strook and Extell for fraud. It is difficult for individuals to sue big companies with deep pockets--especially a law firm -- unless they are sure of their case.

Yet, every subsequent remark from the Extell lawyers continues to harp on the typo. It seems they are bearing witness to the dictum, "Say it enough times and it will become true".

Says the lady who called and lied to the police about a felony by her husband.

One of the city's hottest developers has built a towering tax bill.

Gary Barnett, the head of Extell Development Co., was slapped with a warrant for owing more than $2.1 million in income taxes, according to state Department of Taxation and Finance records.

The developer of luxury Manhattan buildings, he is ranked 29th in the state for worst tax deadbeats, the records show. "We've settled up with everything. It's finished," said Barnett, 54, of Kew Gardens, Queens.

Queens County records still show the debt, but payments can take up to three weeks to clear.

Read more: http://www.nypost.com/p/news/local/queens/bigshot_tax_deadbeat_vNTIC5T9kVK2E5kckAWhDJ#ixzz11JCVJcT1

This just confirms what everyone here already knew, that he is a deadbeat. Doesn't pay his taxes and tries to steal from his customers.

What news sources did NOT pick up is that Extell in their most recent amendment stated that the ongoing lawsuit will not cause harm to the development - exactly OPPOSITE of what they are pleading in court, which is that giving the money back was cause irreparable harm to the building.

I hope the judges are HUD are reading this and investigate!!!!

apt23 is correct. This was NOT a typo. The 'typo' is a fictional defense that Extell made up (which is not a legal defense in contract law anyways.) The Avery's offering plan also had very similar wording and in fact, the Altair, which again had similar wording in the offering plan, Extell ended up giving recession to buyers a MONTH before the outside date in the offering plan. When asked by the AG how Extell can explain these two other offering plans, their response was "these were also typos". This detail was documented in the original AG ruling against Extell. Interesting that major media outlets and even legal blogs still characterize this as a 'typo' - which was probably the best thing Extell's PR team ever did - browbeating the media to use this terminology.

The outside date is NOT a typo, never was, never will be. It was a marketing ploy to have the ability to get apartments on contract back in a rising market but came back to bite them in the butt in a declining market.

It is also remarkable that Extell can get construction loans since the sole head and founder of the company is a major tax deadbeat, defaulted on a personally guaranteed loan and is the subject of a law suit case claiming fraudulent business practices.

Why would a bank extend a commercial loan to this guy when there is not a bank in the world that would give him a mortgage on a house with that record. What is your credit score when are delinquent on $2.1M on your taxes?

Corporations aren't people....

http://online.wsj.com/article/SB10001424052748704847104575532460244002830.html?mod=googlenews_wsj

153 of 271 have closed 41 units in dispute. There you have it they've closed on apx 55% of units(based on raw number of units). And they are not giving the money back..yet

The law firm holding the disputed deposits in an escrow account isn't allowing the money to be returned. That firm, Stroock & Stroock & Lavan, "is not releasing the funds today and has applied to the court for direction," a Stroock spokeswoman said.

An attorney for the Rushmore's developers, a partnership between Extell Development Co. and Carlyle Realty Partners, sent Stroock a letter arguing that there is "no basis at this time" to release the down payments. The letter was sent shortly after the federal appeals court in Manhattan affirmed a district court ruling that said the developers couldn't stop the release of the deposits. The letter indicated the developers could still petition the court for a rehearing. A person familiar with the developers' thinking said the letter sent to Stroock was a standard procedure that allowed Extell and Carlyle to decide whether they intend to pursue the case further.

The office of state Attorney General Andrew Cuomo, however, sent Stroock a letter on Oct. 1, saying that the developers' arguments "are based on a strained misinterpretation of the applicable law." Mr. Cuomo's office instructed Stroock to release the funds to the buyers, or "force us to seek appropriate relief."

What does "force us to seek appropriate relief" mean. This seems like a shallow threat. What is the AGs ammunition? Hasn't he used it already? Unbelievable that Extell is still holding out.

Good to see Stroock is upholding their fiduciary duty as escrow agent. Clearly they are not impartial. Lesson here is, as a buyer, always get a real 3rd party as escrow agent, don't let the sponsor select the law firm who works for the sponsor and THEY pay to hold the money.

Of course, the pre-purchased new construction game is over anyway, anyone who puts a big down payment now on a new construction is an idiot after seeing how guys like Barnett act.

The law firm holding the disputed deposits in an escrow account isn't allowing the money to be returned. That firm, Stroock & Stroock & Lavan, "is not releasing the funds today and has applied to the court for direction," a Stroock spokeswoman said

It says Stroock has applied to the court for direction. They are conflicted between following Extell's instructions and obeying the courts and the A.G. You can be certain they are dotting all the i's and crossing the t's. They are not simply following Extell's instructions, otherwise they would not have applied to the court for direction.

The offering plan clearly states that they are to follow the direction of the AG, or any court ruling. It doesn't matter what the Sponsor says. This language is very clear. There is no conflict here. Both AG and court have said to release the funds.

Extell has the right to go to the Supreme Court on this and challenge, regardless of how weak their position is.

More accurately, I believe that they have the right to petition the Supreme Court for relief. Whether they end up going to court is up to the court, which decides which (small percentage of) petitions to accept. This of course brings us right back to the weak position point...

No one has the right to go to the Supreme Court, the USSC hears the cases they choose to hear. They can petition for Writ of Certiorari, but that does not stay the release of the funds, as the court has ordered. And they would never hear this case for a thousand reasons, starting with this is just about the release of the funds, not the actual merits.

Of course another speculation is they need to "claim" those 41 units as being in contract for some reason or another.... If you include them you have 71.5% closed or in contract as opposed to 50+%

"Extell has the right to go to the Supreme Court on this and challenge, regardless of how weak their position is."

yea and i have the right to sing very poorly on the top of my lungs at the corner of broadway and 42nd but you don't see me doing it.

If Extell's objective is to hang on to the "sales" so that the financial health of the building looks better, would banks who extend loans under these arguably fraudulent circumstances have recourse. Just as the buyers of Trump Soho are suing the developer for fraudulently claiming inflated sales which affects the risk of purchase, wouldn't banks who extend loans have a case if Extell knows they are jigging the numbers.

John Edwards was sued for all the funds he accepted for his presidential bid after the first National Enquirer article appeared that outed his affair. The litigants claimed that since he didn't reveal the risk to his candidacy that only he knew to be true, he accepted the money under fraudulent terms. It would be interesting to know if Extell can be held accountable for facts that only they know to be true.

I'm not following the "arguably fraudulent" aspect here. Extell is pursuing a contractual claim, which to the layman appears to be a weak one. The legal system affords Extell the right to pursue a number of avenues in this claim, which they have been doing without success. Soon enough they will run out of avenues and whichever court has final jurisdiction will presumably issue an order relieving the buyers of their obligations and ordering the escrow agent to release the deposits. Until that happens, this is just Extell being a**holes and torturing the legal system, not defrauding anyone.

Anyway, it's pretty hard to see a prospective buyer or their prospective lender being misled about the issues since the various AG rulings, court proceedings and press coverage have created a stack of paper that could probably reach to the Rushmore penthouse. To have missed this issue and then purchased/lent would be pretty negligent.

Sideline, I agree with you except the point about the prospective buyer. The average person is not aware of the legal issues surrounding the project.

Sideline, not everyone reads street easy, real deal or looks up news stories on Extell.

With every posted comment something is missing- what do you all believe is the consequence of all this? This is still a tangible appealing building and home.

What is the worst case scenario for any buyer?

Also, much of the buyers have been from Asia and totally ignorant of what is going on here.

With every posted comment something is missing- what do you all believe is the consequence of all this? This is still a tangible appealing building and home.

The consequence for me is that I will never even consider buying an apartment from Extell. It's one thing to fight the good fight, but they are throwing sh*t against the wall and hoping something sticks. I would never want to do business with a company like this.

Howabout,

The building is 50% sold, it will eventually sell out, but it could take five years. The worst case scenario is it just takes a long time for the sponsor to relinquish his presence. There's a huge difference between a building that's not profitable for the sponsor and disaster for the buyer.
And the other part of the "worst case" is lack of near-term appreciation on their investment. Especially if they paid at offering prices.

@RS - but everyone uses Google, no?
@SEfan - but they have Google in Asia, no? And Asian buyers have NY real estate lawyers who do due diligence, no?

Not that you even have to be very diligent to stumble across the legal proceedings here...

Googling "Extell Rushmore", the hit parade of reports on the legal proceedings start at the sixth link. Of course using "Rushmore New York" (including "New York" weeds out the Mount Rushmore links), you don't get to the legal proceedings until the seventh link. My point is that you don't need to be searching on "Rushmore legal woes" or "Extell scumbag developer" or reading SE in order to see all you need to know as a purchaser. Rather, it would be very hard to avoid learning about the proceedings even if one set out to be willfully ignorant.

@RS - but everyone uses Google, no?

Everyone ccan, not everyone does. A great many people strictly speak to a broker and/or look at sponsor or broker's website...

"Everyone ccan, not everyone does. A great many people strictly speak to a broker and/or look at sponsor or broker's website..."

Sorry, but I call BS on the idea that people anywhere buy million or multi-million dollar assets at the posted asking price with no questions asked, no research, no attempt to determine comps, no legal representation, etc., etc., etc. You would literally have to do all of these and probably more to end up buying an apartment in the Rushmore and not stumble across the ongoing litigation. You may be right that many people don't do much, but I'm just not buying the idea that people buy seven figure assets the same way they buy books on Amazon. Not plausible.

It absolutely happens. I am willing to bet there are many people who closed on units in the building after the case was filed and the article ran in the times last summer and didn't know about it. You can read threads on here about people who were ushered out when they mentioned the subject to the salespeople. Why would they do that if they didn't think they could dupe people???

There was no mention of it in the legal docs until a month or so ago. It is not lawyers jobs to google things, they read the purchase contract and make minor tweaks.

The brokers have every incentive not to mention it, because they got higher commissions from the Rushmore, and there is no recourse to them. Have you ever had an issue with a broker, and tried to do something about it?

The sales people don't mention it obviously. They show you a glossy printout about how in 2009 they had the highest sales that year, they lie to you about number of sales, and tell you everything is great. Unless they write it down, they can't be held liable, and most people believe they won't be so blatantly lied to. Turns out, they are wrong. Sure, everyone does comps, but that doesn't mean you see anything about the suit.

The guy with six million dollars trusts the broker and lawyer for his due dilligence. He may visit the building but that's it. He doesn't have hours each week to troll easy street.

SIDELINE, i DON'T THINK YOU UNDERSTAND THE MENTALITY OF THE OLDER BUYER WHO PURCHASES A SEVERAL MILLION DOLLAR PROPERTY.

"The guy with six million dollars trusts the broker and lawyer for his due dilligence. He may visit the building but that's it. He doesn't have hours each week to troll easy street."

Glad to see you agree with me. This buyer hires a lawyer and there is no way he doesn't end up knowing about the litigation.

...although, back to Howabout's point, so what? If I show up today looking to buy in the Rushmore, what do I care about the litigation? I know that I have a litigious guy on the other side, so maybe my lawyer is pretty careful about the contract, but at the end of the day I just need to get from signing to closing (a short time since the thing is built and the seller is eager to transact) and pay the agreed price and we're done.

This whole conspiracy theory that (i) every new buyer at the Rushmore is being hoodwinked by the developer over litigation between the developer and other parties and (ii) that this even matters to the new buyer is just silly. It makes me wonder if Oliver Stone's SE handle is Riversider or streeteasyaddict.

i GUESS I DON'T. ARE YOU SAYING THAT WHATEVER INTELLIGENCE AND COMMON SENSE GOT THAT OLDER BUYER THE MONEY TO BUY SUCH A PROPERTY IN THE FIRST PLACE EVAPORATES WITH AGE?

What I'm saying is the guy is busy and trusts his lawyer, and then when stuff like this happens, uses his lawyer again. The guy works 15 hours a day, including weekends and can't spend that time.

Sideline, if the buyer was told, he may act differently. It should be required by law to disclose such litigation udner the risks section of the offering plan. Just my two cents. Disclosure is like sunshine, it's a great antiseptic.

Clearly Extell benefitted by the lengthy legal proceedings to sell apts to people who had either no knowledge of the lawsuit or who were told, as I was, that the case was just a technical issue with no merit. If Rushmore immediately refunded the money to the 41 buyers, sales at Rushmore would have been under 50% sold in a crashing economy. Extell has benefitted from the time line afforded to them by pursuing a legal case.

Of course they have every right to pursue a legitimate legal question. My question is this. If it comes out that they knew irrefutably that there was no typo error -- and the buyers' lawyer is contending that there were earlier papers with the 2008 date -- but proceeded with the case because it would buy them time to avoid a disastrous sales performance, would subsequent buyers have a case against them to rescind their apartment purchases.

The Trump Soho buyers are contending that the false sales figures claimed by the developer masked the actual risk to an investment in the building -- but in that case, the risk is still very clear because they still haven't sold apartments in that building. But in the Extell case, the risk has diminished precisely because Extell used the time afforded by a protracted legal dispute to sell apartments.

The buyers who bought during the time of this lawsuit have lost money -- Extell has subsequently dropped their prices. If the original buyers who are suing Extell for fraud prevail ( that is, there was no typo and Extell always knew it) , could a new second wave of buyers come forward to try and rescind purchases based on fraud.

sis>I'm not following the "arguably fraudulent" aspect here.

Arguably fraudulent because that is what the buyers' attorney is claiming. That there were papers with the 2008 date filed. Not privy to the case, I don't know what they are claiming but one could assume that they might be suggesting that either Extell knew that there was no typo because they should have known about the other papers filed, or perhaps they might be suggesting fraud through forgery.

Fraud through forgery would make this pretty sexy. People go to jail for that. If it's just that one document says one date and another (the offering plan) says another, that looks more like sloppiness/incompetence than fraud. Strook looks like fools but no one goes to jail.

do you think with all of these apts that they are not going to close on that they will start selling them at significant price reductions.

SIDELINE - what you don't understand is that many of the lawyers are 'bought' by Extell since Extell is really the hands that feed them, NOT the buyer. Sure, there are some rich buyers who use their personal lawyers with no connection to Extell, but many closing attorneys DO. And yea, it is against the code of ethics to not disclose this type of stuff - but things like this happen ALL THE TIME. and the buyer's only recourse is to take the lawyer to court and many people just chose to not take that on.

Just read "The Real Deal" and Judge dismisses Extell case, orders release of Rushmore deposits. Now what...how long can Extell continue to hold out. Daniels says Stroock has to release these deposits within 30 days.

Who wants to bet that Extell tries to take it to State Supreme Court and thereby asks for a stay on returning the funds. It is in their best interest to keep the sales count high in order to make more sales.

But really, Barnett, way to piss off the next governor of the state.