Midtown Equities says Blackstone, Rialto refuse extension of $45M Brooklyn Heights loan

The Cayre family’s Midtown Equities through the entity 205 Montague LLC alleges in a complaint filed yesterday in New York State Supreme Court in Manhattan that Rialto Capital Advisors on behalf of itself and the Blackstone Group-owned entity SIG CRE 2023 Venture LLC, has improperly refused a loan extension that Midtown Equities says it is contractually obligated to extend.

Court cases represent the position of one party and are not necessarily accurate or complete. Rialto and Blackstone have not responded in court papers.

Case LINK

According to the complaint, “This action seeks redress for Defendant SIG CRE 2023 Venture LLC,’s deceptive practice of baselessly delaying and intentionally stymying ratification of borrowers’ lawful exercise of their express contractual rights pursuant to the parties’ loan agreements in order to unlawfully manufacture so-called ‘defaults.'”

The complaint, signed by Oved & Oved attorney Terrence Oved, seeks to establish a class action, “on behalf of Plaintiff and a class consisting of similarly situated individuals and entities to whom Defendant baselessly delayed and intentionally stymied ratifying their lawful exercise of their express contractual rights…”

Midtown Equities’ attorneys, Terrence Oved, Darren Oved and Aaron Solomon of Oved & Oved LLP said in a statement to PincusCo, “Rialto’s disregard for Borrowers’ contractual rights is a blatant attempt to extract an unearned windfall or force them into costly, prolonged litigation to enforce their rights. This unlawful practice ends now.”

Midtown Equities borrowed the $45 million in 2022 from Signature Bank. Two years later, Landau Properties recorded a memorandum of contract disclosing it signed a contract to buy the parcel.

On this parcel, Jonathan Landau of Landau Properties submitted a new building construction project for a 136-unit, 411,847 square-foot residential (R-2) building at 205 Montague Street in Brooklyn Heights, Brooklyn. The plan was filed with the New York City Department of Buildings on March 18, 2024 under job number B01017825. It calls for the construction of a 47-story building. The project is described in the filing as: 47-story mixed use new building.

The property

The office building in Brooklyn Heights has 76,041 square feet of built space and 116,462 square feet of additional air rights for a total buildable of 192,500 square feet according to a PincusCo analysis of city data. The parcel has frontage of 238 feet and is 161 feet deep with a total lot size of 19,250 square feet. The lot is irregular. The zoning is C6-4 which allows for up to 10 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing. The city-designated market value for the property in 2022 is $23.1 million. The most recent loan totaled $45 million and was provided by Signature Bank on August 3, 2022.

Prior sales and revenue

This property was sold by Midtown Equities for 0.0 to Landau Properties on April 5, 2024.

The 76,041-square-foot property generated revenue of $4.3 million or $57 per square foot, according to the most recent income and expense figures.

Violations and lawsuits

According to city public data, the property has received two DOB violations, $1,250 in ECB penalties, and $5,250 in OATH penalties in the last year.

There were no lawsuits or bankruptcies filed against the property for the past 24 months.

The neighborhood

In Brooklyn Heights, The bulk, or 26 percent of the 12.1 million square feet of commercial built space are office buildings, with elevator buildings next occupying 23 percent of the space. In sales, Brooklyn Heights has near average sales volume among other neighborhoods with $650.6 million in sales volume in the last two years and is the 7th highest in Brooklyn. For development, Brooklyn Heights has near average amount of major developments among other neighborhoods and is the 15th highest in Brooklyn. It had 1.1 million square feet of commercial and multi-family construction under development in the last two years, which represents 9 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of four of the four commercial properties representing 330,866 square feet of the 330,866 square feet. The largest owner is Jonathan Rose Companies, followed by Landau Properties and then Sol Goldman Investments. On the tax block, there were three new building construction projects totaling 958,488 square feet. The largest is a 136-unit, 411,847 square-foot residential (R-2) building submitted by Landau Properties and filed by Jonathan Landau with plans filed March 18, 2024 and it has not been permitted yet. The second largest is a 136-unit, 411,847 square-foot residential (R-2) building submitted by Landau Properties and filed by Jonathan Landau with plans filed March 18, 2024 and it has not been permitted yet.

The owner

The PincusCo database currently indicates that Landau Properties owned at least one commercial property in New York City with 76,041 square feet and a city-determined market value of $24.1 million. (Market value is typically about 50% of actual value.) The portfolio consists of at least a single office property. It is located in Brooklyn.

The surrounding

Within a 400-foot radius of 215 Montague Street, PincusCo identified three commercial real estate items of interests occurred over the past 24 months. Of those three items, three were loans above $5 million totaling $107.4 million. The most recent of the three was Treeline Companies in which borrowed $30 million from JPMorgan Chase secured by the 129,520-square-foot, 24-unit office building (O6) on 175 Remsen Street on October 1, 2024.

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