Harel Insurance alleges problems in $47M Brooklyn multifamily venture

By Adam Pincus

Israel-based Harel Insurance Investments & Financial Services alleges the operating partner in a $46.88 million investment deal inked in 2018 to acquire a stake in 14 Brooklyn multifamily properties has not kept up its end of the bargain, and the firm is suing under multiple causes seeking more than $40 million, according to the complaint filed Friday. (LINK 516891/2022)

Harel is one of the largest insurance providers in Israel. In this instance it was investing equity.

The complaint is the position of one party and is not necessarily accurate or complete. The respondent, Yehuda Cohen, has not yet filed response papers. Cohen owns a large multifamily portfolio with a concentration in Brooklyn but with assets in Manhattan.

The PincusCo database currently has identified Cohen as an owner of at least 53 commercial properties with 271,997 square feet, 364 residential units and a city-determined market value of $54 million. (Market value is typically about 50% of actual value.) The portfolio has at least $18.4 million in debt, borrowed from JPMorgan Chase and Spencer Savings Bank. (The debt total only counts amounts of $5 million and up signed in the last three years.) Within the portfolio, the bulk, or 82 percent of the 271,997 square feet of built space are walkup properties, with mixed-use properties next occupying 10 percent of the space. The bulk, or 91 percent of the built space, is in Brooklyn, with Manhattan next at 7 percent of the space.

The Harel properties include 399 Clermont Avenue, 358 Weirfield Street, 820 Classon Avenue and 11 others.

The complaint alleges Harel in late 2018 signed an agreement with Crown Heights-based operator Yehuda Cohen, and under the deal Harel acquired a 90-percent stake in a 14-building portfolio which included construction or improvements to the assets. Cohen had purchased most of the buildings before the deal was signed with borrowed money, and on signing, the debt for those acquisitions was paid off. The total purchase price for the properties was just over $23 million, according to a review of city property records.

Harel claims it invested more than $46.88 million, with the plan that Cohen would refinance and buy out Harel, paying it the full investment for each property and a 12 percent annual return on the investment dollars.

The complaint says that the buyout arrangement was agreed to for six of the properties, and two were fully paid off, but the other four were not, and Harel says it is owed just over $3 million for that.

Harel is also seeking $32.8 million related to alleged violations of a settlement agreement the parties signed, as well as other claims.