Emerald Creek Capital filed a lawsuit yesterday alleging that a $23.5 million loan it provided in 2021 to Hidrock Properties secured by the hotel development site at 112 Liberty Street in the Financial District of Manhattan is in a maturity default. The suit is not seeking a foreclosure, instead it is seeking the payment of an alleged $3.5 million guaranty. LINK
The loan matured in the midst of a much higher interest rate environment, which has forced a number of New York City borrowers into default.
The property is near 4 World Trade Center and the 9/11 Memorial pools, and is currently being marketed for sale by Cushman & Wakefield.
According to a source familiar with the asset, the property could be developed as either residential or hotel. In addition, according to the source, there is a lack of liquidity for residential development in Manhattan because of “anti-development policies” and hotel development is restricted because business travel remains low. At the same time, lenders and institutional investors are on the sidelines waiting until the rise in interest rates stops or reverses.
Even as Hidrock faces challenges with this development, it has been selling commercial condominiums at its property at 35 West 36th Street, as PincusCo has previously reported.
In 2018, Hidrock Properties borrowed $23.7 million from HSBC secured by 112 Liberty Street, at the time divided into two commercial condo units 1000521001 and 1000521002. They filed plans to demolish the existing building in May 2019, and filed plans for a new 230-unit hotel in March 2019. The site is now a block-through development parcel with frontage on Liberty and Cedar streets.
In December 2021, Emerald Creek Capital refinanced the loan, with a principal of $23.5 million. The loan, according to the complaint, is in a maturity default. The complaint is seeking payment of a $3.5 million guaranty allegedly secured by pledges of Hidrock members. According to the complaint, “Under the Guaranty, the Guarantors jointly and severally guaranteed payment of, inter alia, the Limited Principal Liability of $3,500,000. The Loan matured on May 30, 2023 and has not been repaid. On May 31, 2023, a written notice of the occurrence of an event of default was sent to the Borrower and the Guarantors. Despite such notice, no Guarantor has paid or performed any of his obligations under the Guaranty.”
Hidrock is facing a $32.8 million commercial foreclosure in Lower Manhattan at 140 Fulton Street. Bank Hapoalim filed a case in July 2022. The case remains ongoing, with a referee estimating the total due is now more than $38 million.