L
e Penthouse, once the most expensive apartment in New York, has now entered bankruptcy. This news comes as no surprise, given Yitzchak Tessler's previous filing of bankruptcy papers for the penthouse and other unsold units in his condo development at 172 Madison Avenue in June. The latest filing comes from Madison 33 Owner, the entity that owns the remaining unsold units. The June filing had come from Madison 33 Partners, an LLC with an ownership interest in Madison 33 Owner.

    The shell games have not deterred creditor ArcPe, which initiated a UCC foreclosure proceeding on Thursday. ArcPe is trying to recover nearly $63 million in debt from a mortgage it purchased in January. Tessler responded to ArcPe's actions, calling them "a ruthless company that only buys loans and forecloses." His filing stated that the debt had been reduced to $32.5 million. When asked about ArcPe's demand for twice that amount, Tessler retorted, "They can go fuck themselves."

    ArcPe's managing partner, David Gordon, stated, "The unpaid principal balance speaks for itself. We are absolutely certain that our numbers are correct." His filing indicated an unpaid principal of $44 million, plus regular interest and default interest. ArcPe's managing director, John Olsen, added, "We're more than willing to work out all non-performing debtors on the amounts they owe."

    ArcPe had attempted to foreclose on the unsold units in April, but Tessler filed for bankruptcy just before the scheduled auction. Jonathan Pasternak, an attorney representing both 33 Madison entities, explained that the initial filing was submitted to preserve managerial control over the project. Attorneys for an ArcPe affiliate filed a motion to dismiss the case, which has been postponed until September.

    Tessler's latest filing values the unsold units - consisting of five unfinished units, five penthouse units, and two commercial units - at over $100 million. It is estimated that it would cost roughly $13.5 million to renovate the penthouse units to their optimal value before they can be sold. Pasternak stated that the goal of Tessler's latest filing is to complete the unfinished units and sell the two commercial and five residential units.

    At the time of the April foreclosure, ArcPe's Gordon suggested that Tessler's overpricing of some units might be responsible for their failure to sell. Tessler revealed that he used two major brokerage firms to appraise the units. The 72-unit development has sold 60 units for nearly $163 million, but the most important one did not sell.

    "Le Penthouse" is the crown jewel of the 33-story property. It was initially listed at $98 million, making it the city's most expensive listing at the time. Tessler later dropped the asking price to $76 million in 2020, but it still failed to sell. "He's had three or four years to sell everything and he's sold nothing," Olsen remarked.

    Tessler secured a condo inventory loan of $164.3 million in 2017 after selling approximately 60 percent of the units. He refinanced the unsold units with $94.5 million from Deutsche Bank in 2018, which declared a default in February 2022. Deutsche Bank sold the loan to ArcPe in January of this year.

    Since the 172 Madison project began in 2015, it has gone through three sales teams. Keller Williams NYC initially led sales efforts, followed by Compass in 2017, which resigned the following year. Sources told The Real Deal that the brokerage departed because of Tessler's aspirational pricing. Corcoran took over most of the open listings in 2018.

    This article has been updated with comments from Yitzchak Tessler and John Olsen.