Yitzchak Tessler wasn’t invited to the party at 172 Madison, the condo building he’d been trying to sell out for a decade.
On the penthouse roof one balmy June night, music blared from the unit’s hot tub, repurposed for the night as a D.J. booth, as the sun set over attendees. Later in the evening, guests borrowed the microphone and belted out crowd favorites.
ArcPe managing partner David Gordon, who arrived in white sneakers, chinos and a blue blazer over a black tee, did make the list. His firm was in the middle of foreclosing on the building’s 12 unsold units, including five penthouse apartments, and agents from Serhant, who were marketing some of the units and hosted the party, swarmed him, eager to show off their sales strategy.
Tessler later claimed to ArcPe’s lawyers that the party happened without his permission, several sources told The Real Deal, another accusation in a fight between Tessler and Gordon that’s gone on for much of the last year, after Tessler entered the entity that owns 172 Madison Avenue into bankruptcy to stave off ArcPe’s foreclosure attempt.
Just weeks before the event, Tessler’s lawyers had submitted a plan to court, in which he would keep the penthouses and pay down a $45 million loan on the building using proceeds from sales and exit financing.
And so, in a legal back-and-forth played out far from the penthouse party in glitchy Zoom boxes and drab courtrooms, Tessler was trying to hang onto the last vestiges of his glitzy condo tower.
When it first came to the market, 172 Madison Avenue, at East 33rd Street, represented an ambitious bet on high-end residential living in a part of Midtown that felt like no man’s land, with its staid commercial buildings, chain restaurants and tourists trying to find the Empire State Building.
It also came during a period when Tessler, who at one point had a real estate portfolio in the city valued near $1 billion, had scaled back the pace of his development. Tessler, whose exact age is unclear but placed in his 70s by multiple sources, focused his energy into ensuring the project’s success.
“I worked there for 13 years, not one day on the beach in Miami,” Tessler said during a court hearing related to the building. “I didn’t want to lose the property.”
Yet sources described a disorganized sales approach and wandering mind, plus a condo market turned sour right before the pandemic sounded the death knell to Midtown. Tessler has admitted that recent health conditions have also set him back.
From carats to condos
Tessler has an origin story fit for the Wild West of Manhattan real estate.
After working on a diamond-cutting factory floor as a boy in Israel, he eventually founded his own diamond trading firm in Johannesburg before moving to New York to lead Y&M Diamond Trading in 1997.
He found his footing in the city’s real estate world, partnering on a condo conversion of the Textile Building at 66 Leonard Street, which sold nearly all of its 46 units by the time closings began in 2000.
On the back of that success, Tessler opened YTT Holdings, a real estate development firm, in 2000 before launching Tessler Developments in 2006 and embarking on a string of other successful condo conversions.
Religious, bearded and heavyset with a thick accent, Tessler chainsmoked his way through the virtual court hearings in the cases related to 172 Madison. His office at 461 Park Avenue was filled with smoke.
“He would light a cigarette, take a few puffs of it, and then whenever he went to make a point, he would lean in, put the cigarette out and make his point,” one agent who worked in the building said. “And then he’d kick back in the chair and take a deep breath, and then pull another cigarette out.”
Tessler is known as a “wheeler-dealer,” according to a source, and he has gotten himself into trouble before.
In 2011, he was forced to sell 1107 Broadway after Lehman Brothers claimed he defaulted in court. Tessler claimed in that case — and in a follow-up interview with TRD — that he never defaulted and Lehman instead owed him money.
“I worked there for 13 years, not one day on the beach in Miami.”
In 2012, high-end restaurateur Jean-Georges, a retail tenant in a commercial unit at 66 Leonard he was selling who agreed to vacate the premises in exchange for $400,000, claimed Tessler said the buyer of the building was going to pay them out — while telling the buyer that Jean-Georges was going to continue paying rent.
In that case, Tessler escaped with just a $10,000 settlement after he pointed out in court that he had never signed the final contract. (Emails showed he did agree to the deal with the chef.)
Years later during the 172 Madison case, he said his lender can “go fuck himself” in response to questions about differing valuations of the unsold units between his calculations and ArcPe.
In the background, Tessler continued developing, albeit at a slower pace: He built a boutique condo in Flatiron with a sellout of $37 million in 2012 and partnered with Isaac Hager on a mixed-used project at 200 Kent Avenue.
But Tessler’s big swing was 172 Madison. He scooped the site up out of foreclosure in a deal worth at least $55 million in 2013 pegged with a projected sellout of over $300 million.
“Give it five or six years, and you’re going to see many office buildings around here convert to apartments,” he told the New York Times in 2015.
Le penthouse
Sales launched strong. In the first four months, 30 percent of the building’s 72 units were under contract.
“At the start, the sales were amazing,” Corcoran’s Raphael Sitruk, who was involved in the building early on and took it over exclusively in 2019, said. “Nothing was really similar in the area.”
The 33-story building had spas for pets and humans, a 67-foot-long lap pool, Miele appliances and ceiling heights that started at 11 feet. Leonardo DiCaprio didn’t buy, but he reportedly rented a three-bedroom.
Keller Williams agent Efraim Tessler, Yitzchak’s son, led sales, as he has done for a number of his father’s buildings over the years.
But several agents who sold in the building said the sales operation under Tessler and his son was nonexistent, with a failure to follow up on leads or create a seamless touring experience. The building got hit with a “Midtown South” tag on StreetEasy. It’s common practice for developers to lobby to have StreetEasy give a building a desirable designation, like NoMad.
“The building was mishandled from the beginning,” said Douglas Elliman’s Eleanora Srugo, who took listings at the building in 2021. “It was too lax of an approach for a project of that scale.”
The Agency’s Tyler Whitman described getting the listing for the project’s mansion unit, a third-floor penthouse originally asking $13 million, in an interaction akin to taking somebody’s lunch order.
“He’s like, ‘Is this the guy we were supposed to meet?’” Whitman said. “He looks like a nice guy. Give him the mansion.” (Whitman, who praised Tessler for giving him his first big listing, eventually sold it for $9.7 million in 2021.)
That may not have been a big deal when the market was still frothy, but it became a larger issue when buyers weren’t jumping to buy luxury condos toward the end of the 2010s.
Sales team members from that time said Tessler had grown increasingly fickle in terms of how he wanted to manage the building.
“One day he’s like, ‘I want you to sell 10 units for 10 or 15 percent off,’ and the next day he’s like, ‘I don’t want to give a percent off,’” one source said.
Another said that even getting an offer was no guarantee that a deal was going to close. “He blew every single deal over like, $10,000 maybe for a storage unit,” they explained. (On StreetEasy, a number of units were listed as in contract, only to later go back on the market without closing).
The frazzled sales approach could be explained by Tessler’s affinity with the building, where he bought an apartment for himself for $2.3 million.
“It was his baby,” said Sitruk. “He didn’t want to let it go.”
In an effort to gin up press, Tessler in 2019 unveiled “Le Penthouse,” a $98 million listing for the building’s top five floors that was at the time the most expensive listing in the city.
Industry onlookers scoffed at the price for the white box space, and Sitruk, who said he conceived of the idea, admitted that “price was high for sure.”
But, “it brought a lot of attention toward the building,” he said.
Starts and stalls
Despite the promotional efforts, the building simply wasn’t selling.
The sales teams put just two units into contract in 2019 and four more in 2020, according to Marketproof.
During this time, Tessler stopped making payments on his condo inventory loan from Deutsche Bank, according to court documents filed by ArcPe.
In 2022, Deutsche Bank declared Tessler in default. The developer spent the next three years trying to arrange a refinancing, court documents show.
In 2023, Tessler put Deutsche Bank’s Jordan Solomon in touch with a potential buyer for the loan and the two sides got as close as exchanging “know your customer” documents before Deutsche Bank sold the roughly $65 million debt to ArcPe in Jan. 2024, unbeknownst to Tessler.
“I got an email from Barry Brecher at ARCPE,” Tessler emailed Solomon on January 23, 2024, pressing him on a deal between the companies. “DID D.B. APPOINTMENT [sic] WITH THIS COMPANY[?] PLEASE REPLY TO ME ASAP.”
At that point — finally — only 12 units remained. Five were the building’s unfinished penthouses, generally considered the profit-generating slice of the development pie. It’s not unusual for the most expensive apartments to go last, or for a building to take years to sell out, but such delays often require working out a refinancing with the lender, something Tessler repeatedly failed to do.
Tessler and Brecher, a contractor for ArcPe, spent the next several months hashing out a plan for Tessler to pay down the loan at a reduced amount of $41 million. They also looked into another option that would allow Tessler to draw down additional funds to finish and sell the penthouses, according to emails filed in court.
By March, it appeared a deal was in place when Tessler’s lawyer inquired about a “handshake” agreement Brecher made with Tessler.
But the following day, Brecher responded: “Information and representations made by Mr. Tessler have somewhat shifted and some of the details are inconsistent with what we discussed.”
The issue: Tessler had claimed he would be able to start construction immediately but did not have any of the permits to do so, according to a source familiar with the negotiations.
Soon after, ArcPe filed to foreclose on the unsold units and Tessler responded by putting them into bankruptcy.
A sharp descent
Meanwhile, the rest of Tessler’s holdings were crumbling around him. He amassed about $100 million in debt, according to court testimony, amid a slew of lawsuits.
He even sued Hager, his business partner at 200 Kent, for over $4 million last year, despite the two having signed an agreement that any dispute would be mediated by a rabbi. His lawyers on another squabble quit after not being paid.
“I hate lawyers now days [sic],” he emailed in a different case around the time he was negotiating with ArcPe. “The [sic] want to suck money out of situation.”
Tessler had his personal bank accounts, which contain roughly $6 or $7 million, frozen this year, after he failed to repay investor Jack Terzi a $3.5 million deposit that Terzi had put down with Deutsche Bank in another effort to get out from under the default.
“I cannot even pay my credit card,” he said in court during an unsuccessful effort to unfreeze his accounts.
His health was also faltering.
“I was extremely sick for a year,” he testified. “I went through four different surgeries at Mount Sinai, so I wasn’t even working. I wasn’t even in the office. I stayed in my house in bed and I had major issues, health-wise.”
Philip Bentley, the judge overseeing the Madison bankruptcy proceedings, noted that Tessler’s “grasp of specifics” of the bankruptcy was “quite limited under cross-examination.”
Final mission
Still, Tessler persisted in getting the penthouses finished. He maintained he could sell them for enough to cover a large part of the loan.
In June, it appeared he would get his shot. ArcPe agreed to reduce its debt claim in exchange for Tessler turning over the seven unsold, finished units in the building. Tessler would keep the penthouses and finish them with $35 million in exit financing. He planned to contribute $3 million.
But days before that reorganization plan was to be confirmed in bankruptcy court, he informed ArcPe that he wouldn’t have the funding. The two sides agreed that Tessler would have to hand over everything at the building.
He spent the next several weeks scrambling, though he may have sensed months earlier that this was the end.
“I’ve built many buildings in Manhattan,” he’d said one day in court, back in February. “It’s not the first one; it’s unfortunately the last one because of this situation.”
Still, the night before a mid-August hearing to confirm the most recent reorganization, he filed a last-ditch update, claiming he had a co-developer to guarantee a fresh $25 million loan at 11 percent interest, enough for him to finish the penthouses. In the arrangement, he wouldn’t even see a dime until his new partner, Wylan/James, had received $10 million from sales.
His lawyer pleaded for 30 more days to complete the appraisal and due diligence needed for the lender.
But ArcPe had seen enough.
“We’ve been hearing about a refinancing, and hearing about all sorts of things, and every time we would give him time,” Offit Kurman’s Jason Nagi, representing ArcPe, said. “No one is willing to do it.”
The judge ruled: The developer would lose the penthouse units he had clung to so tightly for so long.
Tessler listened, his chin resting against his left hand.
He then sat back in his chair, lit a cigarette, and turned off his camera.
