Hello Living files for bankruptcy on the East Flatbush project
Eli Karp’s Hello Living tries to save his precious East Flatbush rental project.
Hello Living Developer Nostrand LLC, the legal person for the 1580 Nostrand Avenue project, filed the case in Rockland County federal court on Tuesday, a day before lender Madison Realty Capital was set to hold an auction. UCC foreclosure on development stakes.
In an odd twist, just hours before Hello Nostrand filed the Chapter 11 filing, Brooklyn investor Abraham Leifer from View Equities claimed to have a contract to buy the project for $ 83 million, including a $ 1 million down payment, according to court records. Leifer’s lawyers were seeking to stop the auction.
Neither Leifer’s attorney nor Leo Fox, Hello Living’s bankruptcy attorney, responded to requests for comment.
By filing for bankruptcy, Hello Living has, at least temporarily, halted the auction and retains control of the property. The Brooklyn-based company can now seek rescue funding. It’s unclear what will happen with Leifer’s alleged contract for the property.
Karp has said in an affidavit that Madison alleges claims over $ 69 million. He said he will try to settle with the lender, his longtime opponent.
Originally from Brooklyn, Karp was looking to build luxury rentals in an area that had not yet been gentrified, south of Prospect Lefferts Gardens, near Little Caribbean. He bought the site for $ 13 million in 2014. Of the 210 units planned at Nostrand Avenue, 95 are complete, a marketing brochure for real estate shows.
Karp alleges that he was eliminated from the business by Madison. After purchasing a number of loans, the lender “defaulted” on its loans at 1580 Nostrand Avenue in order to charge millions of dollars in default interest at a rate of 24%, Karp claims.
He alleges that Madison Realty forced the loan into a forbearance plan that required him to take out an $ 8.3 million mezzanine loan, of which $ 4.5 million was used to pay late interest. Madison then filed the UCC notice.
Madison has firmly denied the allegations.
Lawyers for the lender argued that Karp voluntarily agreed to take over the mezzanine debt and the loan terms. When he broke those conditions, Madison took action.
In late October, a New York Supreme Court judge in Rockland County ruled in favor of Madison, allowing the lender to proceed with the sale of the stakes and most likely take control of the property.
A month later, a Brooklyn judge also sided with the lender, granting Madison’s motion to dismiss Karp’s fraud allegations. Karp is appealing this decision.
Greg Corbin, Bankruptcy and Foreclosure Specialist at Rosewood Realty, spearheaded the sale of UCC.
Faced with foreclosure, developers often bankrupt their project company, giving them more time to restructure and obtain financing to repay lenders.
Madison Realty Capital, led by Josh Zegen, Brian Shatz and Adam Tantleff, is one of the most active lenders in New York City’s commercial real estate market.
UCC seizures are on the rise across New York. Traditional foreclosures are still prohibited under a statewide moratorium, but in a UCC proceeding, the lender takes control of the indirect interests in a property, not the property itself. It remains legal.