Fortis Property Group’s Seaport Residences tower Leans In – The Real Deal

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The party set off from the Skyport Marina. Fortis Property Group CEO Jonathan Landau joined real estate brokers and reporters aboard a picnic boat from Hinckley Yachts, a brand favored by late billionaire David Rockefeller Sr. and home decor queen Martha Stewart. Celebrity broker Fredrik Eklund lounged at the boat’s stern, an American flag whipping behind him. It was 2016.

The boat passed under the Williamsburg, Manhattan and Brooklyn bridges before arriving at the River Café in Dumbo. The group was there to celebrate Fortis’ new condo tower at 161 Maiden Lane, which would soon join the glittering downtown Manhattan skyline across the river from the Michelin-starred restaurant, and to hear about the building’s nautical amenities. Three fully crewed yachts would be on standby for condo owners. 

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The industry titans had no inkling of the calamitous events to follow as they sipped wine on the outdoor patio and later dined on wild sea bass in a brown butter sauce and tiny chocolate marquise cakes shaped like the Brooklyn Bridge

Landau flashed a cheerful, dimpled grin, his shoulder-length hair slicked back, his shirt opened at the top. Fortis President Joel Kestenbaum appeared in a buttoned-up double-breasted suit. They posed for photographers, unaccustomed to such attention. 

This was their first ultra-luxury Manhattan skyscraper. 

Other guests felt right at home. Stars of the reality television show “Million Dollar Listing” and Douglas Elliman boss Howard Lorber mingled with the crowd. Eklund, part of the team marketing the building, literally bought into the developer’s vision, signing a contract for a $4.6 million duplex in the tower. Fortis expected other future residents to pay as much as $18 million for the privilege of calling the building home. The night, the developers hoped, conveyed the effortlessly opulent lifestyle that prospective occupants would enjoy in the all-glass tower, billed as the first in the area.

Those buyers remain hypothetical, and the dream presented that night in Dumbo has devolved into a nightmare. 

Today, the tower looms 60 stories high, rising far above the neighborhood’s mid-rise office buildings. A single strip of glass runs down the middle third of the structure’s face. Gray concrete slabs jut out like vertebrae, with orange construction netting blocking each floor. Wind and rain have whipped through the exposed interior, destroying drywall, framing and insulation installed three years ago. 

Vandals spray-painted over the sign on the ground floor announcing the project’s 2021 opening. A homeless person broke into the site at one point, reportedly disabling the building’s standpipe and causing the city to declare the unfinished behemoth a fire hazard

Worst of all, the tower tilts 3 inches to the north, prompting one British tabloid to dub Landau’s spire “the leaning tower of FiDi.”   

A state court last month ruled that the project’s lender can foreclose on the property, and blame for the rest of the fiasco is currently being apportioned in court. Even if the legal fight concludes, work would resume at a time of high interest rates and construction costs. But it’s not too early to draw some lessons from the emails, letters and text messages entered into evidence. They offer a stomach-churning glimpse of the harrowing view from the C-suite and provide a cautionary tale of how hiring decisions, inexperience, cost-saving measures and fundamental misunderstandings can snowball into disaster. 

“Each bad choice compounds each bad choice,” one industry source said of the hiring decisions at the project. “This was a shit show from start to finish.”

The developer’s vision 

Before Landau was Louis Kestenbaum‘s partner, he was his tax attorney. The pair met when Landau repped Kestenbaum on a joint venture agreement for a project on the Williamsburg waterfront. Afterwards, the two started collaborating on deals, including Northside Piers, a luxury condo tower in Williamsburg. 

They launched Fortis in 2005, bringing on Terrence Storey, another tax attorney, as chief operating officer, and Kestenbaum’s son, Joel, as president, and setting up shop in an eighth-floor office on Dumbo’s Main Street. 

By 2013, the company had built a handful of condo and rental projects in New York City and a sizable office portfolio in Dallas and Boston. They were ready to take their business to the next level. 

The condo market was about to explode, with demand for ultra-luxury units priced above $10 million on the rise; the following year would see average sales reaching record highs.    

“When you make one bad mistake in construction, it has an enormous downstream [effect].”
Jonathan Landau, fortis property group

So when Kay Development offered up a prime development plot on the East River waterfront, Fortis took the leap, purchasing the 11,539-square-foot site at 151-161 Maiden Lane for $64 million. 

Representatives from the project’s lenders and numerous contractors and subcontractors declined to comment for this article. Documents provide a rough outline of what happened next.  

The project’s primary lender was the U.S. branch of Bank Leumi, which had financed other Fortis developments. The offering plan for 161 Maiden Lane estimated that the 80 condos would sell for a total of $272 million, with a top-floor unit marketed at $18 million. 

The building needed a strong foundation, according to RA Consultants, an engineering firm hired by Fortis. The engineers initially recommended that the developers use a method employed by other buildings in the area, which involved deep foundation elements drilled into bedrock.   

Robert Alperstein, founder of RA Consultants, said Fortis struggled to find a contractor willing to go the deep foundation route, due to the height of the proposed building, the size of the footprint and the subsurface conditions.

“The risk for various contractors, they wouldn’t do it,” Alperstein said in an interview. 

One subcontractor suggested an alternative called “soil improvement,” which involves pumping cement grout into the ground and mixing it with the soil to create a solid mass. This cost $6 million less than the deep foundation approach, according to a lawsuit Fortis’ former general contractor, Pizzarotti, filed against the firm and an article in structural engineering trade publication Structure. 

Fortis asked RA Consultants to determine if this would work, not to cut costs but as a path forward for otherwise squeamish contractors, Alperstein said.  

RA Consultants said this was “technically feasible” but that it would lead to the building’s foundation settling unevenly.   

The approach was unusual enough to warrant a June 2018 story in Structure. 

The article, based on interviews with structural engineers involved in the project, offered a slightly different version of events, suggesting there were companies willing to build the foundation using the traditional approach but that the “difficulties associated with drilling” to the depths required for a building of the height Fortis envisioned “resulted in extremely high foundation bids from a limited number of contractors.” 

The alternative, which was “not commonly utilized to support high-rise structures,” it noted, was less expensive. Though it would require design changes and mitigation efforts throughout construction to account for how the building would settle and react to wind whipping from the shoreline, the engineers judged the soil improvement technique a “sound structural solution.” 

“He never asked us for an alternative because of price,” Alperstein said. He added that he has worked with Fortis on a number of projects. “I can’t recommend them highly enough.”

Construction began in July 2015.

The same year, Jack Resnick & Sons sued Fortis, accusing the firm of infringing on the copyright of its nearby One Seaport, the same name selected for the Maiden Lane tower. This dispute, resolved once Fortis agreed to change the project name to Seaport Residences, seems almost quaint in retrospect, given what followed. 

Getting off the ground 

Fortis was a relative newcomer to developing luxury condominiums in Manhattan, but it selected an even newer company to handle construction of the project, the American subsidiary of Impresa Pizzarotti, an Italian infrastructure juggernaut. 

Fortis was attracted to Pizzarotti’s international reputation, and court testimony suggests the contractor offered a comparatively low price for its services, which at least one subsequent company found wildly unrealistic.

Problems began almost immediately.

At Pizzarotti, local leaders came and went. The firm accused CEO Rance McFarland, a construction veteran who was supposed to help the company grow its newly formed New York business, of mismanagement and misappropriation of firm resources.

Fortis Property Group’s Joel (left) and Louis Kestenbaum (Fortis Property Group)

On the morning of Sept. 21, 2017, Juan Chonillo, a 44-year-old Ecuadorian native, reported to the site after being called into work at the last minute by his employer, SSC High Rise, a subcontractor hired by Pizzarotti to build the tower’s concrete core. 

The city’s building code prohibits moving a platform while workers are nearby, but that day, an SSC foreman instructed employees to move a platform with a crane, even though five workers were still on the structure, according to investigators. The platform got stuck. Chonillo, a father of five with a decade of construction experience, unhooked his harness in an attempt to fix it. The platform jolted, sending Chonillo plummeting 29 stories to his death.  

The city shut down the site, and the Manhattan district attorney’s office charged SSC with manslaughter. Prosecutors blamed the subcontractor for failing to train workers to safely move the platforms.  

Construction resumed nearly three months after Chonillo’s death.

Early in 2018, work was shut down again, this time because of improperly installed safety netting and an accident with a concrete bucket that grazed the 34th floor and poured concrete  onto the street.   

Leaning tower of Pizzarotti

Jason Giessel was worried. 

Pizzarotti had hired Giessel’s company, RC Structures, to take over for SSC, but his contract did not protect him from the mistakes of previous contractors. And he had just noticed a major issue: The building was leaning 3 inches to the north. 

In an April 2018 email, he told an attorney for Pizzarotti that his company could not add to the building without an OK from the project’s structural engineers. 

The engineering firm, WSP, adjusted some structural elements to offset the building’s lean on its upper floors, allowing construction of the superstructure to continue and the tower to top out at 670 feet in September 2018.

But tensions continued to build during installation of the glassy façade, the “intentional reflective face” that Landau had told a reporter would “move with the water.”

“We write this letter to express our deepest concerns,”  Pizzarotti project manager Scott Lakow and engineer Gabriele Corazza began in a Feb. 4, 2019, letter to Fortis, subsequently entered into court documents. Pizzarotti was experiencing “numerous issues” with Fortis’ preferred curtain wall contractor. 

There were “numerous outstanding design issues” stemming from the tower’s misalignment, and no plan to address them, they complained. Winter weather had put already completed work in danger of “deterioration and corrosion.”  

Until its concerns were addressed, they concluded, Pizzarotti could no longer risk moving forward.

Landau, enraged, replied that Fortis had showed “tremendous restraint” by not firing Pizzarotti up to that point. 

“Our patience has run thin,” Landau wrote. “Suffice it to say, for more than two years now, Pizzarotti has repeatedly, inexcusably and with impunity failed to meet its contractual obligations as our Construction Manager on the Project.”

The two parties also blamed each other for the tower’s lean. Pizzarotti alleged in court documents that Fortis chose the cheaper soil method for laying the foundation. The developer countered that the contractor was at fault for failing to “properly survey and ensure the plumbness of the building.” 

In a statement, a spokesperson for Fortis said that “Pizzarotti failed to exercise the attentiveness and standard of care required, did not perform the mandated accurate surveying and did not perform proper concrete installation.”  

“Where we went wrong on the South Street Seaport project was we hired a construction firm that wasn’t local,” Landau told Bisnow in January. “When you make one bad mistake in construction, it has an enormous downstream [effect].” 

Pizzarotti and Fortis ended their contract in early 2019. 

Soon after, Fortis replaced the Italian firm with Ray Builders, which had been the owner’s rep on the project. The new contractor was also relatively inexperienced in Manhattan luxury skyscrapers, though the firm had done a number of smaller scale condo buildings in the borough, as well as a lot of commercial work in Lakewood, New Jersey, and completed a Fortis condo project at 347 Henry Street, a 15-story building that drew headlines in 2021 for a screeching sound it made on windy days.  

At 161 Maiden Lane, Ray Builders had a bigger budget than its predecessor. Ray CEO Jacob Mermelstein testified that Pizzarotti’s budget was unrealistic. 

“What I do know is that the previous budget never worked,” Mermelstein said in court in May 2022. ”It couldn’t work and, therefore, the budget increased very drastically.”

Fortis disputes that Pizzarotti’s contract was low-balled, and a spokesperson said other bids for the project came in with similar prices.  

Both Fortis and Ray Builders seemed to understand how much was at stake in the handover.

The evening before Ray’s first day, Fortis’ head of construction and development, Akiva Kobre, sent an email to Louis and Joel Kestenbaum. The new construction manager had to start off on the right foot, he wrote, since the Department of Buildings had ordered a safety compliance officer to monitor the site after Chonillo’s death and was watching the project closely. 

“[Ray] must realize that because of the Pizzarotti history with poor safety at this building, the DOB is extremely sensitive to this project,” Kobre wrote. “It is not just another project to the DOB.”

The lenders

“Avner we have a very big problem,” Landau texted to Avner Mendelson on July 2, 2020. 

“Pls. call me.”

Mendelson, then CEO of Bank Leumi’s U.S. branch, later testified in court that he’d received similar “something is burning” messages from Landau about the project over the years. This one came as Landau was becoming increasingly desperate to avoid another shutdown, this time for financial reasons. Fortis said that the bank, its project lender, had failed to pay a single dollar of its loan since March 2019.

Ray Builders’ workers had not been paid for several months and were threatening to walk, and four days after Landau’s text message, they did. 

Fortis then sued Bank Leumi for failing to fund $30 million of its $120 million loan.

“Whatever stigma is associated with a distressed project evaporates very quickly.”
appraiser Jonathan Miller

The bank initiated a foreclosure proceeding, accusing Fortis of defaulting on the terms of its agreement. Fortis, the bank said, had failed to obtain a temporary certificate of occupancy by its May 31 deadline.

Mack Real Estate, which provided a $66 million mezzanine loan, suggested that Bank Leumi USA issue a low-leverage loan to Fortis, according to a text message from Peter Sotoloff, then-head of Mack, in July 2020.

 “Otherwise count on World War III and total lawyer enrichment with time and losses for all … or just let this thing go nuclear,” Sotoloff said to Mendelson in a message included in the lawsuit. Still, he sympathized with the bank’s frustration. 

“I know how we all feel about Fortis, but there were eventually much less costly ways of handling them than this … hurts all of us unnecessarily,” Sotoloff wrote. “Now Leumi looks horrible despite the history.” 

Last year, Mack filed its own lawsuit against Fortis and Leumi, accusing both of fraud. It alleges that Leumi said it would keep funding the loan past the May 2020 deadline even if costs rose, but went back on its word. It also alleges that Fortis failed to disclose the construction snafus that created a  “banana-shaped” building. 

The tower’s future 

The 17th floor of 180 Maiden Lane, the leaning tower’s neighbor, was once the sales gallery for Fortis’ project, providing a preview of its stunning panoramic views.

Now, the view from 180 Maiden is an “eyesore,” said David Sturner, CEO of MHP Real Estate Services, who is marketing upper-floor office space there. 

Leasing activity has progressed anyway at the office building. Sturner said the building is 90 percent leased and has rented out more than 54,000 square feet in the last eight months. 

Fortis believes the cost of completing the project to be upwards of $106 million — if it is ultimately able to do so. 

The company and its lender failed to reach a resolution through mediation, and a state court recently ruled that Valley Bank, which acquired Bank Leumi USA last year, can move forward with foreclosing on the project’s loan. A spokesperson for Fortis said the company is considering its options but hopes to ultimately finish the project. It is also still pursuing a separate lawsuit against the bank.  

A lot will have changed if and when Fortis — or another developer — gets back to work. Landau left Fortis in December to launch a company, Landau Properties, with his daughter and son-in-law. Fortis is still locked in a court battle with Pizzarotti over the tower’s lean and allegations that Fortis still owes the contractors tens of millions of dollars. In court, the two companies agreed that the unfinished tower did not pose an immediate safety hazard, but an engineer hired by Pizzarotti warned that it was unclear how the tower would move once its façade was installed. At one point, 71 of the 80 units at 161 Maiden Lane were under contract, but the buyers backed out. 

Fortis is also facing a separate, unrelated suit over its development of the former Long Island College Hospital in Brooklyn. The company, however, is seeing success at Olympia Dumbo, a condo project that is more than 50 percent sold and could become the borough’s most expensive address. 

The Department of Buildings periodically inspects the Maiden Lane property and says it has found no evidence that the tower is structurally unstable. Construction could continue, with a redesigned façade, though building now would mean renewing expired permits and dealing with high interest rates and soaring prices for material. Condo sales in new developments dipped below pre-pandemic averages in September and October, though the lack of condo inventory and the potential explosion of demand could play in the project’s favor. 

“When a distressed project comes on the market, and the defects are corrected so that it can be offered, whatever stigma is associated with it evaporates very quickly,” said appraiser Jonathan Miller, whose firm was hired at one point to appraise the condo project.  

For now, the yachts and the high-end homes and the reflective façade that would move with the water are still just visions, given life only by the tilted tombstone in the downtown skyline.

“The saddest thing in this industry is an unfinished building,” one developer, who asked to remain anonymous, said. “It’s a huge physical reminder of what can go wrong.”

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