EB-5 investors allege $110M mezz loan default in Brooklyn Heights

The EB-5 investment company U.S. Immigration Fund through the entity BPL Funding 100 LLC, alleges a $110 million mezzanine loan given to the developers of the project known as One Clinton Street, in Brooklyn Heights, is in a maturity default.

According to the complaint, the loan was given in 2017 and had a final maturity date of June 15, 2024, and has not been repaid. This loan to the developer Hudson Companies, covers 1 Clinton Street which has 134 for-sale condo units.

Case LINK

Court cases reflect the position of one party and are not necessarily accurate or complete.

EB-5 affiliated lenders have filed several complaints in 2021 and 2022, including against HFZ Capital Group, Dermot Companies and Vanbarton Group.

The complaint says, “The mezzanine loan is in default because the mezzanine borrower failed to repay the mezzanine loan on the maturity date… The initial maturity date of the MLA was June 15, 2022. However, the MLA provided for two maturity date extension options, permitting the Borrower to extend the maturity date, first, to June 15, 2023, and second, to June 15, 2024…. The Guaranteed Obligations due under the Guaranty, exclusive of accruing and default interest, costs and attorneys’ fees and expenses, total not less than $137,596,767.87 as of November 18, 2024.”

According to the condo offering plan, “Mezzanine Lender” refers to BPL Funding 100, LLC, its successors and/or assigns. “Mezzanine Loan” refers to the loan(s) made by the Mezzanine Lender to Mezzanine Borrower and to Clinton Affordable LLC for the construction of (i) the Building, and (ii) certain improvements constructed or to be constructed at 909 Atlantic Avenue and 1043 Fulton Street, Brooklyn, New York. “Mezzanine Pledge” refers to that certain the Pledge and Security Agreement dated as of June 15, 2017 by and between One Clinton LLC, the sole member Declarant and BPL Funding100, LLC pursuant to which One Clinton LLC pledged and granted a security interest to BPL Funding 100, LLC in and to, inter alia, 100% of the limited liability company interests of One Clinton LLC in Declarant, as such agreement may be amended, supplemented, restated or replaced.

According to the condo offering plan, “IAR Seller is constructing one (1) rental building on the Atlantic Site and one (1) rental building on the Fulton Site, a portion of each will constitute affordable housing under the Inclusionary Housing Program pursuant to a Regulatory Agreement (the “Regulatory Agreement”) with the Department of Housing Preservation and Development of the City of New York (“HPD”). Together, the Atlantic Site and the Fulton Site will contain 114 units of affordable housing (“Inclusionary Housing”), which will range in affordability from 60% to 125% of the Annual Median Income (AMI) and will be permanently affordable and under rent stabilization for as long as the One Clinton Condominium stands.

The building was developed by Hudson Companies and the lawsuit alleges principals of the company signed guarantees.

The property

The condo building with 134 residential units in Brooklyn Heights has 405,545 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 252 feet and is 183 feet deep with a total lot size of 25,477 square feet. The lot is irregular. The zoning is C6-4 which allows for up to 10 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing.

Development

For the tax lot building, it received its initial certificate of occupancy on November 4, 2020.

Violations and lawsuits

According to city public data, the property has received $1,740 in OATH penalties in the last year.

There were no lawsuits or bankruptcies filed against the property for the past 24 months.

The neighborhood

In Brooklyn Heights, The bulk, or 26 percent of the 12.1 million square feet of commercial built space are office buildings, with elevator buildings next occupying 23 percent of the space. In sales, Brooklyn Heights has near average sales volume among other neighborhoods with $772 million in sales volume in the last two years and is the 3rd highest in Brooklyn. For development, Brooklyn Heights has near average amount of major developments among other neighborhoods and is the 13th highest in Brooklyn. It had 1.2 million square feet of commercial and multi-family construction under development in the last two years, which represents 10 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of one of the two commercial properties representing 725,991 square feet of the 753,671 square feet. The identified owner is Brookfield Properties. On the tax block, there was one new building construction project filed totaling 294,379 square feet. It is a 134-unit, 294,379 square-foot residential (R-2) building submitted by Hudson Companies and filed by Sally Gilliland with plans filed January 18, 2016 and permitted July 20, 2017.

The owner

The owners according to the Department of Housing Preservation and Development includes Jorge Jorege, head officer and Natali Hernandez, officer. The business entity is The One Clinton Condominium.

The surrounding

Within a 400-foot radius of 1 Clinton Street, PincusCo identified two commercial real estate items of interests occurred over the past 24 months. One of those two items was a sale which Cadman Towers HDFC bought the 450,503-square-foot, 121-unit co-op (D4) on 10 Clinton Street and one other property for $62.2 million from Cadman Towers Inc. on July 18, 2024. One of those two items was a loan which Jonathan Rose Companies borrowed $11.4 million from Valley National Bank secured by the 31,059-square-foot, one-unit office building (O5) on 142 Pierrepont Street and one other property on September 7, 2023.

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