UPDATE, November 12, 2020, 2:28 p.m.: HFZ Capital Group is making a final attempt to stop its lender from auctioning off loans related to four of the company’s Manhattan condo projects.
The prolific developer has filed a lawsuit seeking a preliminary injunction against Groupe CIM to prevent the lender from proceeding with a auction scheduled for Thursday at noon. On Wednesday, a judge temporarily suspended the auction. HFZ attorney David Scharf of Morrison Cohen said a judge could decide next week to stop the sale for good.
HFZ, led by Ziel Feldman and Nir Meir, alleges that the auction planned by CIM is a “predatory attempt to capitalize on the Covid-19 pandemic by leading a hasty and commercially unreasonable sale”, which would pave the way for CIM to take over four properties: 88-90 Lexington Avenue, The Astor at 235 West 75th Street, and Fifty Third and Eighth at 301 West 53rd Street. CIM holds four junior mezzanine loans with a balance of $ 89.5 million.
Mezzanine loans are subordinated to senior loans in the stack of capital, and generally carry higher interest rates. JPMorgan and Oaktree Capital conducted a $ 500 million in refinancing of the four HFZ properties in 2016.
The IMC, headed by Shaul Kuba, Avi Shemesh and Richard Ressler, is a developer and active lender in several major American markets
HFZ did not return a request for comment. The CIM Group did not return a request for comment, nor did its lawyer Gary Mennitt of Dechert.
The two sides were negotiating a loan modification over the summer, until CIM changed its tone and sent HFZ four letters of dissolution, according to the complaint. In October, the lender reportedly asked HFZ to disburse $ 8 million, but refused to commit to modifying the loans or canceling the auction.
HFZ says CIM did not intend to restructure the loans. Instead, HFZ alleges that CIM is considering making a “credit offer” at the auction, which would allow the lender to take control of the collateral on the properties. (The credit offer would allow CIM to bid with the debt that HFZ owes.)
The lawsuit also cites the Uniform Commercial Code and New York law, which require UCC seizures to be made on “commercially reasonable terms.” The two-month notice of the auction and the completion of such a sale at the height of the pandemic is untenable, claims HFZ.
The dispute with the CIM is the last financial and legal issue for HFZ. The development company faces a number of lawsuits from lenders and contractors for unpaid bills and loan payments.
Chicago-based credit investor Monroe Capital recently decided to exclude a Loan of $ 126 million. HFZ has an industrial portfolio of 13 properties. Barry sternlicht Starwood Capital is also suing HFZ, claiming that the developer had broken a forbearance agreement on a conversion to a cooperative of Chatsworth at 344 West 72nd Street.
And on the Upper East Side, HFZ owes more than $ 18 million in delinquent loans on a planned development at 1135 Lexington Avenue, according to a lawsuit filed last week. Feldman and Meir are listed as personal guarantors of the debt.
UPDATE: After the publication, a judge temporarily halted the auction which was scheduled for Thursday.