Courts roundup: $23M LIC pre-foreclosure; second round $65M Midwood pre-foreclosure, $9.2M East Village forbearance

$23M LIC condo dev loan pre-foreclosure: Cathay Bank seeks to foreclose on a $23 million construction loan lent in 2018 for the development of the 86-unit Meridian Towers condominium at 37-19 32nd Street in Long Island City with an alternate address of 37-21 32nd Street. The sponsor is Shangri-La Astoria Inc. that includes various individuals signing loan documents, as sponsor and named in the court filing. Eastone Equities lists the property on its website with the address 37-21 32nd Street.
In 2023, Shangri-La Astoria Inc. sought to refinance the $23 million loan, according to allegations in a complaint Northwind Group filed in December 2023, 656538/2023. In it, Northwind Group alleged the prospective borrower did not abide by a term sheet signed October 20, 2023, with an exclusive period, that envisioned a $27 million loan from Cathay Bank.

According to the developers’ answer to Northwind, “Plaintiffs’ inducement included promises to expedite underwriting to which $20,000 of the above mentioned $80,000 was specially allocated as nonrefundable with the balance to be credited to Defendants at closing for the closing costs or to be paid to Plaintiffs as agreed-to-liquidated damages in the event the loan does not close with the Plaintiffs through no fault of the Plaintiffs. 28. In a classic “bait and switch”, Plaintiffs materially and drastically and unilaterally altered the terms of the transactions contemplated by the Term Sheet to their favor along with Plaintiffs inflating their closing costs causing undue duress to the Defendants to accept Plaintiffs’ onerous terms. The developers bought the property in 2013 for $8.1 million.

The loan was not refinanced, and Cathay Bank filed the pre-foreclosure yesterday in New York State Supreme Court. Case LINK

Second pre-foreclosure for $65.5M Kingswood Center mall loan: This is the second time in eight months that the trustee for the bondholders of a securitized loan filed a pre-foreclosure on the $65.5 million loan secured by the Kingswood Center mall at 1630 East 15th Street in Midwood, Brooklyn. The property is owned by Urban Edge Properties.

In the first case, 516996/2023 filed in June 2023, Urban Edge Properties admitted it was in default and submitted a motion for summary judgment in October 2023, but the lender opposed the motion.

That led the presiding judge, Justice Lawrence Knipel, indicating he was irked, to dismiss the borrowers’ summary judgment motion with a critique: “Defendant, acknowledging it is in default and owes the sums sued upon, moved for Summary Judgment against itself. Plaintiff opposes, contending that defendant lacks standing to so move. Opposes??? Motion granted only to extent that action is dismissed, without prejudice to renew at such time that plaintiff is serious about relief sought.”

According to the complaint, “Borrower failed to pay the monthly installment of interest due on May 6, 2023, an Event of Default. Accordingly, the Loan is and has been bearing interest at the Default Interest Rate since then. Plaintiff provided written notice of Borrower’s default to Borrower and Guarantor by letter dated May 12, 2023.”

Midland Loan Services is the special servicer.

This, the second pre-foreclosure case, is substantially similar to the first one. Case LINK

Forbearance inked for $9.2M loan at Magnum Chelsea rental days before auction: Just days before Magnum Real Estate Group’s Chelsea retail was set to sell at an auction with a judgment of $13.7 million, the parties signed a forbearance agreement which postpones any foreclosure sale until mid-2025. 850055/2022 The original loan was $9.2 million.

Referee Mark L. McKew set a February 7, 2024, sale date for the Chelsea three-unit building at 241 West 14th Street that Ben Shaoul’s Magnum Real Estate Group bought in 2006 for $8.75 million. The lender 241 Norwood LLC, is in care of Starwood Property Trust, and bought the note in October 2021.

Case 850055/2022 LINK

Direct link to the property’s ACRIS page