On Thursday, May 27, 2011 Tarter Krinsky & Drogin obtained authorization from a U.S. Bankruptcy Court of to allow real estate developer Trevor Davis to sell all six residential units at a financially troubled property located at 1055 Park Avenue in New York City. The court heard the motion on short notice at Tarter Krinsky & Drogin's request. The following day, with the firm’s assistance, the sponsor simultaneously closed five of the residential units, generating approximately $19 million in proceeds, of which approximately $18 million was needed to pay off a senior loan that was carrying a burdensome interest rate. The firm also secured the junior lender's agreement to accept a discounted payoff in satisfaction of its loan upon closing of the sale of the final remaining unit. The closings, payoff of the senior loan, and agreement for resolution of the junior loan follow six months of intense negotiations and other actions taken by TKD to minimize Trevor Davis’s exposure to the junior lender and to facilitate the completion and sellout of the project.

The Real Estate and Bankruptcy Practices have worked together closely over the past six months to address multiple issues related to the financial difficulties of 1055 Park Avenue, many of which have received significant press coverage over the past year.

Mr. Davis acquired the property at 1055 Park Avenue in 2005 at the height of the real estate market and obtained a $15 million loan from Wrightwood Capital to develop it into six luxury condominium units. In March 2010, after Wrightwood halted funding of the loan, Mr. Davis contributed $4 million of his own funds to the project and obtained a mezzanine loan in the amount of $6 million, which he personally guaranteed, from Zimco Holdings. The residential units were then completed and received certificates of occupancy in August 2010. In November 2010, the senior loan was purchased by an entity controlled by Austrian investor Andreas Badian; the default interest rate was 13.25%. In December 2010, Mr. Davis filed for Chapter 11 bankruptcy protection after Zimco called a default on its loan and scheduled an auction of Mr. Davis’s equity interest in the real estate project. Filing for personal bankruptcy protection for Mr. Davis, but not filing the property itself into bankruptcy, was the most viable strategy to generate proceeds sufficient to pay off both the senior and mezzanine lenders while preserving Mr. Davis’ personal assets.

Partner Scott Markowitz, who leads the Bankruptcy and Corporate Restructuring Practice Group at TKD, and Partner William W. Weisner, who leads the Real Estate, Practice Group at TKD, represented the client in this matter.