The Real Deal New York

Chaim Miller’s portfolio unravels as old courtroom foes return with new claims

Legal drama ends with bankruptcy auction for three Brooklyn buildings

August 25, 2016 07:30AM
By Kyna Doles

From left: Proposed rendering of 271 Sea Breeze Avenue in Coney Island, Sergey Rybak and 96 Steuben Street in Clinton Hill

In 2015, Chaim Miller owned over 1 million square feet of real estate across Manhattan and Brooklyn. But with at least 20 lawsuits filed against him in the last two years, the Brooklyn investor has been forced to sell some of his most valuable assets to satisfy judgments from lenders and ex-business partners. And it appears history is repeating itself.

Pushed against the ropes by hungry creditors and disgruntled former partners, Miller now has three more buildings on the block — a planned 90-unit Coney Island rental property in foreclosure and two recently-constructed Clinton Hill buildings with a combined 62 units.

The story starts with Miller, a protege of developer Abraham Leser, acquiring 271 Sea Breeze Avenue in Coney Island in December 2013 for $12.7 million, boosted by an $11 million loan from his go-to lender, Josh Zegen’s Madison Realty Capital. He picked up another $250,000 loan from Madison two months later.

Josh Zegen

Josh Zegen

But the wheels quickly fell off, according to Madison’s legal team. As early as April 2014, Madison alleges that Miller stopped paying the mortgage. By June 2015, Zegen’s firm moved to foreclose on the 138,000-square-foot property. Madison’s case is still pending, and a referee recently determined that Madison is owed $18.5 million plus interest, according to court documents. A judge has not yet signed off on the judgement against Miller, and Zegen declined to comment on the suit.

A mere month after Madison brought its foreclosure suit, Miller was hit with another claim on the development site. The complaint came from Brooklyn-based developer Sergey Rybak and his partner Jason Reznik, who were in contract to buy 271 Sea Breeze Avenue for $14.4 million. The project, dubbed “the Sochi” after the Russian olympic resort town, is a planned 90-unit rental building.

According to court documents, the sale was contingent on Miller renewing permits for the project and securing approval for amended plans before the Dec. 31 deadline for 421a. The deal collapsed after Rybak and Reznik determined Miller would not have measures in place by the end-of-the-year deadline, and sued to recover their $750,000 downpayment.

In April of this year, Rybak and Reznik were awarded a $65,000 judgement against Miller, and the vacant site is now scheduled to hit the auction block on Sept. 7 through a sale with the Kings County sheriff’s office, according to a lawyer representing the developers. Rybak and Reznik hope to acquire the property through the auction sale and satisfy the remaining creditors.

Meanwhile, as Miller was dealing with the foreclosure of the Coney Island property, one of his main creditors and ex-partners, Chun Peter Dong, in December 2015 filed for Chapter 7 bankruptcy against a limited liability company controlled by Miller.

That entity, 97 Grand Avenue LLC, owned two recently-built Clinton Hill buildings on one tax lot: 97 Grand Avenue and 96 Steuben Street. Miller bought the buildings for $26 million in 2013 and Madison later assumed the mortgage from the original lender. According to bankruptcy records, the property is valued at $42 million and creditors, including Madison and Dong, are owed a total of $43.3 million, with Dong seeking repayment of a $1.3 million loan. Madison, the senior lender, has a claim of $30.5 million on the buildings.

97 Grand Avenue

97 Grand Avenue

Although Miller disputed Dong’s bankruptcy petition, 97 Grand Avenue LLC eventually filed for Chapter 11 bankruptcy in April of this year and the properties are now on the block. Besen and Associates is marketing the property, although an auction date has not been determined yet. The brokerage is hoping to fetch $44 million for the two buildings.

The winning bidder will be buying a property with a lengthy history of litigation. Crest Realties’ Aaron Drazin, a familiar face in the ever-evolving real estate soap opera starring Chaim Miller, is another creditor who had debt claims on 97 Grand and 96 Steuben. Drazin successfully sued Miller and his close associate Sam Sprei in 2014 to recover a $1.5 million loan he issued to 97 Grand Avenue LLC. Drazin accused Miller and Sprei of transferring ownership of the property from 97 Grand Avenue LLC to another limited liability company to avoid paying the debt. A judge later agreed that Sprei fraudulently conveyed the deed and ordered him to pay Drazin the $1.5 million.

Even Miller’s longtime boss Leser has brought claims on the property. Leser loaned Miller $8.5 million for 97 Grand Avenue LLC, and later sued after claiming he had no idea Miller brought on additional investors. A judge from Kings Court Supreme Court sided with Leser, and Miller confessed he owed his boss $10.5 million, according to court documents.

In the last year, Miller has parted ways with 45 John Street, which sold for $73.6 million in a bankruptcy auction, and bounced back months later to buy a stake in the Beekman Tower from Silverstein Properties for $138 million (after Larry Silverstein sued him, of course). Miller did not respond to requests for comment.

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