Arch Companies places Nostrand Ave $50M-plus rental in bankruptcy to effectuate sale

Arch Companies, effectively controlled by the Wiener family’s Canadian investment firm 35 Oak Holdings, placed 1580 Nostrand Avenue in Prospect Lefferts Gardens in bankruptcy on March 8, in order to effectuate a sale of the property. The filing states assets and liabilities are each between $50 million and $100 million.

The property has debts of more than $70 million, according to a 2022 pre-foreclosure filing Arch Companies made.
The bankruptcy comes after the property’s developer Eli Karp of Hello Living, lost his effort to control the building through a master lease.

Bankruptcy 24-22192-shl

Bankruptcy pdf

The elevator building with 93 residential units in East Flatbush has 109,000 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 200 feet and is 295 feet deep with a total lot size of 27,036 square feet. The zoning is R6 which allows for up to 2.43 times floor area ratio (FAR) for residential. The city-designated market value for the property in 2022 is $18.6 million. The most recent loan totaled 0.0 and was provided by Arch Companies on March 8, 2022.

The mezzanine loan went into default, according to the bankruptcy filing, starting in 2021. In addition, the property was the subject of a long-running foreclosure case 524162/2022 which centered on, the bankruptcy filing states, “the validity of a master lease encumbering the property, issued by Eli Karp to an affiliate or closely aligned company. The controversy surrounding the master lease delayed the foreclosure proceedings… The litigation was recently resolved pursuant to a settlement agreement which provides for a negotiated termination of the master lease… Additionally the mezz lender obtained the resignation of Eli Karp as the debtor’s prior manager.

The building is a 93-unit new construction rental.
Arch Companies, at the time led by Jeffrey Simpson and Jared Chassen, bought the mezzanine debt and the senior debt on the property. Traded NY reported the price to be $58 million.

Bankruptcy

Kevin Wiener, of 35 Oak Funding, signed for Hello Living Development Nostrand LLC, the sole member of Hello Nostrand LLC, which owns the property, to place the property in bankruptcy.

On March 7, Jeffrey Simpson, filed to place the managing member of the Arch Companies holding entity, JJ Arch LLC, into bankruptcy. His attorney sent a letter to the bankruptcy court judge in this Nostrand Avenue case, putting the judge on notice of the JJ Arch bankruptcy. However, the JJ Arch bankruptcy does not state an ownership interest in the Nostrand Avenue property in its list of assets.

Prior sales and revenue

This property was sold for $13.1 million on September 5, 2014.

Development

Hello Living submitted a new building construction project for a 88-unit, 159,029 square-foot residential (R-2) building at 2902 Albemarle Rd. The plan was filed on July 17, 2014 and was permitted on August 9, 2018. It calls for the construction of a 55-foot tall, six-story building and was filed with the New York City Department of Buildings under job number 320916167.

Violations and lawsuits

According to city public data, the property has received $4,435 in OATH penalties in the last year.

The property was involved in one lawsuit and zero bankruptcies over the past two years. The suit was a $69.2 million commercial foreclosure concerning a loan filed on August 18, 2022, by Arch Companies against Hello Living and Eli Karp.

The neighborhood

In East Flatbush, The bulk, or 32 percent of the 42.6 million square feet of commercial built space are elevator buildings, with walkup buildings next occupying 24 percent of the space. In sales, East Flatbush has near average sales volume among other neighborhoods with $347.6 million in sales volume in the last two years and is the 23rd highest in Brooklyn. For development, East Flatbush has near average amount of major developments among other neighborhoods and is the 7th highest in Brooklyn. It had 1.7 million square feet of commercial and multi-family construction under development in the last two years, which represents 4 percent of the neighborhood’s built space. There was one pre-foreclosure suit filed among other development buildings in the past 12 months.

The block

On this tax block, PincusCo has identified the owners of two of the four commercial properties representing 140,772 square feet of the 149,772 square feet. The two identified owners are Hello Living and Spencer Equity Group. On the tax block, there were two new building construction projects totaling 318,058 square feet. The largest is a 88-unit, 159,029 square-foot residential (R-2) building submitted by Hello Living and filed by Eli Karp with plans filed July 17, 2014 and permitted August 9, 2018. The second largest is a 182-unit, 159,029 square-foot residential (R-2) building submitted by Hello Living and filed by Eli Karp with plans filed July 17, 2014 and permitted December 23, 2015.

The owner

The PincusCo database currently indicates that Hello Living owned at least four commercial properties with 227 residential units in New York City with 253,008 square feet and a city-determined market value of $45.6 million. (Market value is typically about 50% of actual value.) The portfolio has $57.8 million in debt, with top three lenders as Greystone & Co., Cantor Commercial Real Estate Lending, and Madison Realty Capital respectively. Within the portfolio, all identified are elevator properties. They are all located in Brooklyn.

The surrounding

Within a 400-foot radius of 2902 Albemarle Road, PincusCo identified one commercial real estate item of interests occurred over the past 24 months. It was a loan which Candor Capital borrowed $6 million from S3 Capital secured by the 1,848-square-foot, three-unit three-family building (C0) on 1558 Nostrand Avenue on June 15, 2023.

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