Three banks have petitioned U.S. Bankruptcy Court, White Plains, to force developer Michael P. D’Alessio into Chapter 7 liquidation.
The Westchester Bank, Greater Hudson Bank and BNB Bank claim that D’Alessio owes them more than $6.3 million.
D’Alessio is head of Michael Paul Enterprises, a White Plains company that claims a 25-year record of building and managing commercial and residential real estate projects. But in the past four months, 14 people and four companies have filed lawsuits accusing him of fraud over failed real estate projects.
“There was absolutely no fraud committed,” D’Alessio said in an email today. “Just a case of disgruntled seasoned real estate investors with big damaged egos.”
D’Alessio solicited investments for seven residential real estate projects, according to lawsuits filed in Westchester and Manhattan supreme courts. Four of the projects entailed Upper East Side townhouses; three were houses in Scarsdale, Southampton and Westhampton.
Total project costs were estimated at more than $114 million.
The Manhattan business model was to buy townhouses, demolish or gut them, and build luxury condominiums.
One of the townhouses was once the home of actress Brooke Shields, according to a news account in The Real Deal real estate publication.
He promised investors returns of 10 to 16 per cent a year and quick repayment of principal. But last year, the lawsuits say, payments stopped.
High-end condominiums in Manhattan were hot when he launched the first project seven years ago, D’Alessio told investors in a recent report. Since then, the market has cooled and the “strictest regulatory administration” in city history has driven up costs and slowed down construction.
He also said banks shut down his lines of credit and stopped funding construction loans when they saw a newspaper story about a lawsuit. BNB Bank in Hauppauge, Suffolk County, claims in the bankruptcy petition that D’Alessio owes $3.2 million.
Greater Hudson Bank in Bardonia, Rockland County, is claiming $2.25 million on a line of credit. Westchester Bank, White Plains, says he owes $879,026.
D’Alessio has 21 days to respond to the involuntary bankruptcy petition.