Lender sues note buyer after $10M LIC hotel note sale falls through

A trustee for a securitized loan is seeking to retain a $1 million deposit given by an affiliate of Hafeez Choudhary, which bought a contract to buy the outstanding debt with an original principal of $21 million secured by a hotel at 39-05 29th Street, formerly known as the Holiday Inn Long Island City Manhattan View. Holiday Inn is not involved in the litigation.

The purchase price for the defaulted loan was just over $10 million, according to court records. The filing states, “‘Purchase Price'” means $10,071,625.00 (which equals Purchaser’s offer price of $9,850,000.00 plus a Ten-X Transaction Fee of $221,625.00.)”

The complex case involves a pre-foreclosure action filed by the securitized lender COMM 2015-CCRE23 in March 2022, (705262/2022), a bankruptcy case filed by Hafeez Choudhary’s note buying entity 39-05 29th St Hotel LLC, (8-23-72250-reg) and finally this case, in which the lender COMM 2015-CCRE23 is suing the note buying entity 39-05 29th St Hotel LLC for the $1 million deposit as liquidated damages. LINK

The proposed default amount of the loan was listed as $29.8 million in the pre-foreclosure action, but the borrowers have filed numerous objections to the total. Another accounting from June puts the total payoff amount for the loan at more than $31 million.

Choudhary is a co-owner of the hotel at 39-05 29th Street and is also a member of the entity (known through the bankruptcy filing) that sought to buy the $21 million debt at a price of $10 million, which is known through the bankruptcy filing in which Choudhary identifies himself as a member of the note-buying entity. The hotel is also subject to a ground lease.

Choudhary’s note-buying entity allegedly defaulted on the contract by not funding the balance of the note purchase as of the closing date of June 22, 2023. On that day, his placed the note-buying entity into bankruptcy.

That bankruptcy terminated in August, according to court records, and now the securitized lender is seeking to retain the $1 million deposit.

The foreclosure action against the hotel owners remains active.

as lender

The property

The hotel building in Long Island City has 63,839 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 100 feet and is 100 feet deep with a total lot size of 12,509 square feet. The zoning is M1-2/R5D which allows for up to 2 times floor area ratio (FAR) for manufacturing and up to 2 times FAR for residential. The city-designated market value for the property in 2022 is $13.7 million.

Prior sales and revenue

This property was sold for $21.9 million on December 31, 2014.

Development

Hafeez Choundhary of Queens Plaza North LLC submitted a new building construction project for a hotel/dormitory/shelter (J-1) building at 39-05 29 Street. The plan was filed on April 21, 2006 and was permitted on August 7, 2007. It calls for the construction of a 151-foot tall, 16-story building and was filed with the New York City Department of Buildings under job number 402367997.

Violations and lawsuits

According to city public data, the property has received two DOB violations, $1,250 in ECB penalties, and $1,250 in OATH penalties in the last year.

The property was involved in one lawsuit and one bankruptcy over the past two years. The suit was a $21 million commercial foreclosure concerning a loan filed on March 9, 2022, by COMM 2015-CCRE23 and Wilmington Trust against Hafeez Choudhary, Mark Farruqui, and Delwar Hussain.

The neighborhood

In Long Island City, The bulk, or 32 percent of the 60.1 million square feet of commercial built space are industrial buildings, with elevator buildings next occupying 31 percent of the space. In sales, Long Island City has the 8th highest sale turnover among other neighborhoods in the city with $2 billion in sales volume in the last two years. For development, Long Island City is the 4th most active neighborhood among other neighborhoods. It had 8.3 million square feet of commercial and multi-family construction under development in the last two years, which represents 14 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of six of the 12 commercial properties representing 189,230 square feet of the 304,930 square feet. The largest owner is Flux Factory, followed by Frank Falco and then Hazelton Capital Group. On the tax block, there were two new building construction projects totaling 74,627 square feet. The largest is a 50-unit, 37,314 square-foot residential (R-2) building submitted by Hui Shi and filed by Hui Shi with plans filed November 12, 2021 and it has not been permitted yet. The second largest is a 50-unit, 37,313 square-foot residential (R-2) building submitted by Hui Shi and filed by Hui Shi with plans filed December 15, 2021 and permitted May 19, 2022.

The owner

The owners according to the Department of Housing Preservation and Development includes Hafeez Choudhary, head officer and Mark Farruqui, officer. The business entity is Queens Plaza North LLC.

The surrounding

Within a 400-foot radius of 39-09 29 Street, PincusCo identified eight commercial real estate items of interests occurred over the past 24 months. Of those eight items, two were in new building development. There were two new building permit applications. The most recent of these two items was a filing on December 15, 2021 for a 37,313-square-foot residential (R-2) building with 50 residential units at 39-26 30th Street. One of those eight items was a sale which Paceline Equity Partners bought the 63,648-square-foot, 99-unit hotel (HS) on 29-14 39th Avenue for $34.5 million from Radson Development on July 27, 2023. Of those eight items, five were loans above $5 million totaling $81.7 million. The most recent of the five was Paceline Equity Partners in which borrowed $24.4 million from Ponce Bank secured by the 63,648-square-foot, 99-unit hotel (HS) on 29-14 39th Avenue on July 27, 2023.

Correction: An earlier version of this post included Uri Dreifus of Rockaway Capital Partners as an owner of the note-buying entity. However, he sold the note-buying entity and is not involved in this litigation.

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