Madison Realty principal Josh Zegen, Raphael Toledano, 325-329 East 12th Street and 223-235 East 5th Street (Madison Realty, Google Maps, Toledano by Michael McWeeney)
After four years of legal limbo, Raphael Toledano is no longer the owner of a troubled 15-building apartment portfolio that sent a subsidiary of his firm into bankruptcy.
Madison Realty Capital, Toledano’s lender, acquired the East Village properties Wednesday for roughly $153 million as part of a liquidation plan confirmed in March. The lender acquired the properties through a credit bid, meaning it used the debt Toledano owned toward the purchase.
A subsidiary of Toledano’s Brookhill Capital owed Madison about $140 million, including $124 million used to purchase the buildings in 2016, interest and attorneys fees.
Madison did not return a request for comment by the time of publication.
Madison and Toledano have spent the past few years mired in lawsuits that stalled bankruptcy proceedings. In late 2020, Madison settled claims that the firm had financed Toledano’s purchase knowing the landlord intended to illegally deregulate the apartments and push tenants out.
The settlement also resolved claims brought by the attorney general against Toledano and claims filed against his businesses in bankruptcy court, allowing Chapter 11 proceedings to move forward.
Madison offered $1 million in rent credits to tenants in the buildings’ 279 units to settle the suit. (In 2019, Toledano agreed to pay $3 million to tenants.)
Silverstone Properties, an affiliate of Madison, has managed the properties in the four years since bankruptcy filings began. Nearly half of the portfolio’s units have stood empty in the same amount of time, many of them demolished.
Recently, however, some tenants have seen signs of new construction.
Kathy Wakeham, a resident of 325 East 12th Street, heard renovations starting last month in the buildings’ four unoccupied units that weren’t gutted by Toledano. She said a contractor said the new apartments would go to families in need — part of the agreement Madison made with the attorney general’s office during the December 2020 settlement.
Otherwise, Wakeham doesn’t expect the finalization of Madison’s ownership will change much.
“It will be very nice to see new people — especially after the pandemic,” she said.
