3 Garment District properties with $52M Lightstone loan, placed in bankruptcy

The entities that own three Garment District properties, 28 West 36th Street, 32 West 39th Street and 36 West 39th Street, which together secure a $52 million loan from the Lightstone Group,  were placed into chapter 11 bankruptcy protection on Wednesday in two separate filings. The bankruptcies come as a May 2024 state court proceeding in a related action 652669/2024 had been reviewing the appointment of a receiver. The original borrowers were Aron Rosenberg and Albert Rosenberg. The bankruptcy petitions were filed by David Goldwasser of FIA Capital Partners, who specializes in managing bankruptcies through the federal courts.

The bankruptcy filings claim the owner entities are virtually worthless, and the debts were between $50 and $100 million.
8-24-73697-las for 28 W. 36 Herald Properties, LLC
8-24-73698-las for 32 W. 39th Midtown Properties

The Lightstone Group, in that May 2024 lawsuit, alleged that Aron Rosenberg and others, borrowers of a $52 million loan Lightstone Group provided in 2022 and secured by the Garment District buildings at 28 West 36th Street and 32 West 39th Street, have failed to send nearly $500,000 to the correct account. The Lightstone Group alleged it was losing the income which damaged the collateral of the loan.

Lightstone Group through its affiliated company, Lightstone Capital in turn through its entity LSC West 36th & 39th St LLC, provided a $52 million loan to affiliates of R&B Realty Group, in March 2022, for the renovation of 28 West 36th Street and the conversion of 32 West 39th Street into office condominiums.

Court cases represent the position of one party and are not necessarily accurate or complete. The borrowers have not yet responded in court filings.

Case LINK

The complaint does not state a precise amount it is seeking, but alleges nearly $500,000 has been “misappropriated” related to the $52 million loan.

According to the state court complaint, “The two Properties are Class B office buildings in the Penn Plaza/Garment District submarket in Manhattan. 28 West 36th Street is a 12-story building comprising approximately 66,550 square feet and is approximately 92.2% leased. 32 W. 39th Street is a 14-story building comprising approximately 78,738 square feet of unsold sponsor commercial space and is approximately 22.7% leased… This matter arises out of the Defendants’ [incorrect allocation] of rents, additional rents and other monies (the “Property Income”) which are supposed to be controlled and disbursed by Plaintiff—as lender—in accordance with the loan and guaranty documents that control the parties’ relationship. All in all, Defendants appear to have blatantly misappropriated nearly half a million dollars in Property Income… [Lightstone has been harmed] by, among other things, [defendant] directing that tenants at the Properties pay Property Income to an account other than the designated Clearing Account.”

Direct link to the property’s ACRIS page and link to DOB NOW portal.