Lightstone Group battles borrowers of $52M Garment District loan over tenant payments

The Lightstone Group alleges that borrowers of a $52 million loan Lightstone Group provided in 2022 and secured by two Garment District buildings at 28 West 36th Street and 32 West 39th Street, have failed to send nearly $500,000 to the correct account. The Lightstone Group alleges losing the income damages the collateral of the loan.

Lightstone Group through its affiliated company, Lightstone Capital in turn through its entity LSC West 36th & 39th St LLC, provided a $52 million loan to affiliates of R&B Realty Group, in March 2022, for the renovation of 28 West 36th Street and the conversion of 32 West 39th Street into office condominiums.

Court cases represent the position of one party and are not necessarily accurate or complete. The borrowers have not yet responded in court filings.

Case LINK

The complaint does not state a precise amount it is seeking, but alleges nearly $500,000 has been “misappropriated” related to the $52 million loan.

According to the complaint, “The two Properties are Class B office buildings in the Penn Plaza/Garment District submarket in Manhattan. 28 West 36th Street is a 12-story building comprising approximately 66,550 square feet and is approximately 92.2% leased. 32 W. 39th Street is a 14-story building comprising approximately 78,738 square feet of unsold sponsor commercial space and is approximately 22.7% leased… This matter arises out of the Defendants’ [incorrect allocation] of rents, additional rents and other monies (the “Property Income”) which are supposed to be controlled and disbursed by Plaintiff—as lender—in accordance with the loan and guaranty documents that control the parties’ relationship. All in all, Defendants appear to have blatantly misappropriated nearly half a million dollars in Property Income… [Lightstone has been harmed] by, among other things, [defendant] directing that tenants at the Properties pay Property Income to an account other than the designated Clearing Account.”

Within a 400-foot radius of 28 West 36th Street, PincusCo identified 10 commercial real estate items of interests occurred over the past 24 months. One of those 10 items was a sale which Elite Group International NY bought two condo units in the 3,805-square-foot, 57-unit mixed-use building (RC) on 35 West 36th St and one other property for $5.5 million from Hidrock Properties on May 24, 2023. Of those 10 items, nine were loans above $5 million totaling $348.6 million. The most recent of the nine was Rockbridge Capital in which borrowed $28.5 million from BankUnited secured by the 55,000-square-foot, one-unit hotel (H3) on 57 West 35th Street on May 13, 2024.

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