Developer Jeff Hirschfeld of Hirschfeld Properties has filed suit against German-based lender Eurohypo and Area Property Partners, alleging they sabotaged his multi-million dollar upgrade of a South Jersey residential property after his joint-venture partner, a unit of Dubai World, ran into financial trouble.
Hirschfeld teamed up with Dubai Investment Group in 2008 to buy the former Landmark Apartments, a 544-unit complex at 1900 Frontage Road in Cherry Hill, N.J., for $71.3 million.
In the Feb. 25 lawsuit filed in New York State Supreme Court, Hirschfeld alleges the lenders stopped funding the project after learning of Dubai World’s financial crisis and then foreclosed on the deal.
“This lender seized upon the difficult real estate environment to engineer a default and then used the manufactured default to avoid funding construction so it could then steal the property from the owner,” said attorney Steve Meister, who represented the developer in the case.
Hirschfeld alleges that his venture partner, Dubai Investment Group, owned 95 percent of the venture and he originally contributed $1.35 million to the project. The loan consisted of a $68. 4 million A note payable to Eurohypo and a $10 million B note payable to Arefin.
Hirschfeld’s company controlled the development and renovation of the apartment complex, which was scheduled to be renamed the Grand Apartment Homes. He says the lenders found out in the fall of 2009 that Dubai World would not be able to provide any additional financing in the property due to problems it was having back home.
By January 2010, the lenders wrote Hirschfield a letter stating the loan was out of balance by $4.5 million, and the borrower had to fund the shortfall in two weeks. Hirschfeld claims he was two months away from completing the project and spent only $400,000 of a $2 million contingency fund.
He claimed lenders withheld funds from the renovation, which led contractors to walk away from the site. In April 2010, the lenders filed to foreclose in New Jersey Superior Court in Camden County. Eurohypo asked for a receiver.
Hirschfeld is demanding the lenders pay back his initial $1.3 million investment, plus $1.75 million for lost profits and another $2 million to cover his share of the deficiency payment, among other damages.
Hirschfeld, Eurohypo and Area Property Partners declined to comment.