The Real Deal New York

Suit claims KMG misled investors for distressed Bronx property

Investment group alleges that property fund failed to disclose financial condition of site

October 09, 2014 06:00PM
By David Jones

kmg

2252 Haviland Avenue in the Bronx, and Eric Granowsky (credit: WFLA)

Three principals of KMG Partners and a prominent New York law firm are facing a suit from a private investment group that claims they were defrauded in connection with a Bronx multifamily property that went into default without their knowledge.

KMG, a real estate fund, was accused in a Manhattan Supreme Court complaint filed Oct. 3 of soliciting more than $550,000 from private investment group TMDL Haviland for the 120-unit ‘Haviland Portfolio’ in the Bronx in 2012, without disclosing that it had defaulted on an $8 million mortgage loan. The suit also claims that the residential complex was facing imminent foreclosure.

“At the time, KMG, acting as a majority owner and administrative member in charge of day-to-day operations of the property let the mortgage go into default and never disclosed that information,” attorney Judd Grossman, who represents the plaintiffs — an investment group called TMDL Haviland — told The Real Deal.

KMG, led by principal Eric Granowsky, has been an investor or repositioned a number of properties in New York, Florida and other major real estate markets. Now-defunct investment bank Lehman Brothers also invested in the Bronx property.

KMG, which was founded in 2004 and renamed ESG Equities in 2012, allegedly solicited the funds from investor Barry Lipson. He in turn forwarded the request to his son, Kenneth Lipson, the CFO of TMDL Asset Management Inc., which brought in additional investors into the TMDL Haviland group, according to court records.

According to the complaint, KMG partnered with Lehman Brothers in January 2008 to acquire the properties, located at 2252 to 2262 Haviland Avenue in the Castle Hill section of the Bronx.

The buildings included eight four-story walkup properties, originally developed between 1920 and 1928, and totaled more than 97,000 square feet.

According to the suit, Lehman tried to find a minority investor in the property after its 2008 bankruptcy. Granowsky found Lipson in April 2012.

A month later a mortgage payment was missed and New York Community Bank issued a default notice in June, warning of a foreclosure without a payment of more than $141,000.

According to the complaint, law firm Belkin Burden Wenig & Goldman, at the suggestion of Granowsky, became counsel for the Lipson led investment group. The complaint, which accuses the firm of legal malpractice, claims that Daniel Altman, a partner at the firm, failed to perform any due diligence on the property.

KMG finally disclosed the late notices in October, according to the suit. The property was sold at a “fire sale” for almost $10.18 million.

Granowsky did not return calls, nor did Altman.

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