Hello Living files bankruptcy to block Flatbush UCC sale with $69M Madison Realty claims

Eli Karp of Hello Living filed to place his Flatbush project at 1580 Nostrand Avenue into bankruptcy to block a UCC auction and protect his interests in the property with a newly constructed residential building and an adjoining vacant lot. The chapter 11 petition was filed in U.S. Bankruptcy Court in Manhattan. LINK

The entire project will have 210 units, according to the Commercial Observer. Karp alleges lender Madison Realty Capital has charged too much in penalties and interest on a construction loan with an initial principal of $63 million from Prophet Capital Asset Management, given in 2017. Madison bought the debt in 2019.

According to the petition, “The Debtor is the parent of Hello Nostrand LLC, the owner of the real property that resulted in this Chapter 11 filing. The filing by the parent was done to stay the UCC Mezzanine Loan of $3,000,000 principal foreclosure by the creditor, Madison Realty Capital LLC (“Madison Realty”), of the Debtor’s 100% membership interest in Hello Nostrand LLC (“Hello Nostrand”). The Mortgage is held by Madison Realty on the real property of Hello Nostrand alleging claims of over $69,000,000. The Debtor and Hello Nostrand will attempt to settle with Madison Realty.” The Real Deal reported on Karp’s battle over the UCC foreclosure, here.

Karp’s petition says the building obtained a TCO in June 2021, but the city’s Department of Buildings records do not show a TCO.

“The building is ready to be occupied but remains vacant. There is a pending contract with the Development of Homeless Shelters, a New York agency which will permit the City to provide residents shelter and occupy the building under a nine (9) year lease at an annual rental of $2,785,000 with a 3% annual increase.”

In June 2021, Karp sued Madison Realty in State Supreme Court accusing the lender of  fraud, breach of contract and other claims, but that suit was dismissed in November, according to the petition. Karp appealed. That case link is here.

Direct link to Acris document. link