Dumbo NYC

Notes from the DUMBO, Brooklyn NY neighborhood


133 Water Street Files for Bankruptcy

February 25th, 2009

133 Water Street

Bloomberg News reports that Water Street Realty Group LLC, owner of a luxury rental building in Dumbo filed for bankruptcy protection yesterday. Just before the building received the TCO, the building was converted from condo to a rental building at a time when buyer interest started slowing for new construction in Dumbo and a few condos were converted to rentals. Per Bloomberg:

“The company, in its Chapter 11 petition filed today in U.S. Bankruptcy Court in Manhattan, listed debt of $30.4 million and assets of $20 million. General Electric Capital Corp. is listed as the company’s largest unsecured creditor, with a “disputed” claim of $22.4 million. Broadway Bank also has an unsecured claim of $20 million, according to court documents…The building was bought by Water Street Realty for $17.3 million in August 2006, according to a March 2007 blog on the real estate Web site Brownstoner.com.”

{NYC BIS: 133 Water}
{133 Water Street Received Their TCO, 16May2007}
{Scarano Architect Water Street Development Update, 23Aug2006}

Filed in Real Estate, Water Street at 11:21 am
Comments
  • samuli
    i rememeber vividly this shiny piece of architecture wet dream from my trip to DUMBO back in october... nice to see bloomberg quoting brownstoner.com...
  • STR
    Does this mean the tenants don't have to pay rent anymore?
  • anony
    So what does this mean for us residents? I suppose if they sell the building, whoever buys it will jack up prices?
  • Wendy at Water Street
    Seriously, what does this mean for the residents? Is there anyone with legal knowledge out there? Will the tenats have to vacate or will the terms of their current leases go on until a new building owner is in place? I have lived there for over a year in a rental one bedroom situation and love it. I really don't relish having to move again.
  • IANAL, but check your lease for something called a nondisturbance clause. It should spell out what happens if your landlord goes into loan foreclosure or bankruptcy.
  • BrooklynLove
    it means that your security deposit is adios.

    the estate will get much less for this place if the rent roll goes kaput so don't expect to stop paying and go un-noticed - your landlord effectively just became a judge.
  • Not so fast on the security deposits Brooklynlove. Legally that money should not be commingled with the general funds of the owners. It still belongs to the tenants until they tear the place apart on the last day of their lease. Also both of those loans are unsecured therefore not a mortgage on the building therefore not in foreclosure. They can't seize the building to satisfy the loans. They may have to sell the building to satisfy the debt but that would not void the residential leases.
  • You guys in that building should keep an eye on essential services such as oil, common areas electric, elevator maintenance and the like. Some vendors may hesitate to service the building without seeing cash on the barrel head.
  • Mike
    Wow, Loose Stool... sometimes you are capable of actually contributing non-snarky and useful information to this site, who'da thunk it?
  • BrooklynLove
    LS: how does a tenant get their security deposit back short of lodging a claim against the estate? holding it back from the rent due is definitely not going to fly now that these leases are in the bankruptcy. a buyer of the building (or the trustee) would need to assume the obligtation, otherwise the security deposits are just unsecured claims against the estate. the trustee (or buyer) can acutally reject these leases as they are executory contracts - but that likely wouldn't happen if there is a buyer anytime soon. so if your lease comes up before any formal assumption of the lease then say bye bye to your deposit - as a practical matter.
  • OK, in theory a trustee could empty the building, but only in theory. The likelihood of that happening is probably zero, no not probably, absolutely. Trustees obligation is to the creditors, but to empty the building of market rent paying tenants would be detrimental to the creditors. A buyer could not void the leases, he does not have the same rights as the bankruptcy court.If that was the case people would be setting up LLCs all over the place and put them into bankruptcy whenever they wanted more rent. It is likely that the trustee might order the building sold. In that case the leases would survive with security deposits intact. The bigger problem will be the immediate servicing of the building. It is likely that monthly bills will be ignored given the owners have bigger headaches.
    The security deposits? If you are waiting for it to be returned today you're out of luck, but I think in the long run the judge will restore them. It's similar to a parking garage that goes bankrupt. On day one you are screwed but ultimately you will get your car back.
    Hey Mike, eat me! (insert barfing smiley face here)
  • jan
    oh, LC, you're a lovable piece of crap. I appreciate the comments but since the building just filed for bankruptcy yesterday, nothing will happen for at least a few months. however, I did notice some money saving measures such as turning down the heat or saving on energy. Nothing that other buildings arent doing.
  • tenant
    This is all governed by Sec 365(h) of the bankruptcy code.

    The trustee can either assume or reject a lease the debtor has as lessor. If he assumes it, then nothing really changes.

    If he rejects it, then the tenant has a couple of options. The tenant may be able to treat the rejection as a breach of the lease and exercise the tenant's rights to terminate it. Alternatively, the tenant can exercise its rights under the lease through its current term and any renewal terms. So the worse case is that you can live their through the end of your current lease.

    I'd suspect the trustee will attempt to renew the leases at current market rates to preserve the estate, which is the building and the rent roll.

    With respect to the security deposit, the code doesn't appear to address the issue, but the landlord is the trustee of the funds, not the owner and therefore the security deposit isn't an asset of the debtor. I don't think it comes into the estate and therefore it will eventually be returned to the tenant. In particular if the building is sold the new owner typically has to assume the obligation to return the security deposit.
  • BrooklynLove
    you're spending too much energy citing statutes and repeating the substance of the posts above yours and not enough time thinking practically.

    so your lease ends and you want to leave, the building is still in the bankruptcy (very likely). you are owed a security deposit back under your lease. multiple creditors (many secured) are owed money as well under their various contracts. get to the back of the line and say goodbye to your 250. debts >>>> assets.
  • The security deposit would be considered an "unsecured priority claim" entitling you to get in the middle of the line after the secured claims but before the unsecured creditors like those listed in the article.
  • Wendy at Water Street
    loose stool, you're secret is out, you must be a lawyer, which explains the constant snarky comments, ha! But, seriously, thank you for your knowledgeable comments along with the other helpful posters here regarding this matter. It has encouraged me that most likely the bankruptcy trustee will not terminate the leases nor want to vacate the building, as this is where the money will come to pay back the claims. As you pointed out, I have been worried about losing the essential services, hallway trash pick up, repairs, doormen, etc. but so far it has been business as usual. Hopefully it will stay that way, as the trustee will want to keep the building sellable and not decrepit.
  • what to do
    So, residents (or others with valid opinions) are you going to try to apply your security deposit to one of your month's rent payments? I imagine most paid last month and security deposits so you can't just apply it to your last month.

    Seems like there is a low probability that you would be seeing your security deposit any time soon after your lease is up.
  • Wendy, you make Loose Stool want to cry.
  • BrooklynLove
    middle of the line effectively equals end of the line when front of the line secured creditors sum to greater than mkt val of estate assets. this building is levered to the moon.

    re quality of life, trustee would need to assume the contract with building management as an initial matter so keep your eye on that.
  • loose stool
    Brooklynlove, There is no trustee in Chapter 11. The company continues as is under the protection of the bankruptcy court. Your cassandra complex is beginning to annoy me. You need to give hand jobs to a different court clerk.
  • BrooklynLove
    the line equals end line when frontline secured to the moon. life assume the management as an initial eye on that.
  • MY day favorite time acid in kicks. Once again Brooklynlove, clock a like we tell time stopped perfectly a day twice.
  • BrooklynLove
    fake BL post - nice to know that someone is on my nut. how does it taste?

    LS - this 11 will be a 7 shortly.
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