Israeli investor sues Feldman, HFZ over $10M loan at 76 11th Avenue
76 11th Avenue (Credit: Google)
Israeli investor Yoav Harlap through the entity YH Estates LLC, filed his second suit against Ziel Feldman and HFZ Capital Group in the past 13 months, alleging wrongdoing by the developer.
The first suit, brought by YH Lex Estates LLC, was related to development of a condominium project at 1133 Lexington Avenue.
The new suit is suing over a $10 million loan Harlap provided connected to the $870 million purchase of land for HFZ’s 76 11th Avenue condo and hotel project in 2015. Harlap’s entity is seeking RICO status. The project is known as The XI.
Court filings are the positions of one party and are not necessarily accurate or complete.
HFZ and Feldman have been targeted in a raft of lawsuits over the past two years seeking hundreds of millions of dollars.
According to the new suit, “The Feldman Enterprise transmitted false and fraudulent draw requests, based on misleading and incomplete lien waivers, invoices, receipts, monthly progress reports, sales tracker reports, appraisals, budgets, forecasts, and financial statements (collectively, “False Documents”), for the purpose of wrongfully obtaining construction loan advances from the Project’s lenders.
“The Feldman Enterprise utilized False Documents in support of draw requests to justify the advance of construction loan proceeds, notwithstanding that the prior work had not been completed, as represented, and Defendants had failed to pay various contractors and vendors, as represented.
“Upon information and belief, Defendants skimmed millions of dollars of excessive “development” fees, which they improperly paid to themselves from loan advances and/or from member investments, in breach of their fiduciary duties and contractual obligations.
“On or about November 24, 2014, Plaintiff loaned $10 million to an entity described by Defendants as “76 Eleventh Partners LLC”. To persuade Plaintiff to invest in the Project, Defendants represented to Plaintiff, based on inflated and misleading projections, that Plaintiff’s $10 million investment would ultimately be worth at least $30 million.
“On May 7, 2015, Defendants purchased the Property for $870,000,000.
“As of June 3, 2015, Plaintiff’s loan had matured. Thereafter, on August 14, 2015, at the request of Defendants, and based on Defendants’ misrepresentations, Plaintiff agreed to convert its $10 million loan, together with accrued interest of $673,972.60, into an equity investment in HFZ Partners. Under the terms of the Letter Agreement and Subscription Agreement, attached hereto as Exhibit B, Plaintiff acquired a 3.19% membership interest in HFZ Partners. Between June 2016 and December 2020, HFZ Manager improperly diverted more than $246,000,000 in loan proceeds that had been advanced by TCI in response to HFZ Manager’s draw requests into other HFZ projects.
“Work at the Project slowed down and eventually came to a complete stop in November 2020.”
Direct link to Acris document. link