A Manhattan-based real estate fund has filed a breach of contract suit against the troubled Park Avenue Bank and asked for a restraining order to block any further attempts to forgive delinquent loans.
Park Avenue Funding, which filed suit Thursday in New York State Supreme Court, asked for a restraining order to prevent the bank from settling any more loans that it claims would threaten more than about $3.9 million it has invested in the bank.
“[Park Avenue] Funding is concerned that the bank will again breach its obligations as servicer of the participation loans in an effort to improve its equity capital and appease the FDIC by reducing its concentration in commercial real estate loans,” the lawsuit says.
The Federal Deposit Insurance Corp. and the New York State Department of Banking issued cease-and-desist orders against the bank in February 2009, alleging the bank engaged in risky lending practices.
Park Avenue Funding alleged that a fourth-quarter 2009 “call report” shows that Park Avenue Bank’s equity capital had fallen from $8.9 million to negative $2.9 million.
The bank entered an agreement to loan $3 million to Pascol Realty for a mortgage on 608 West 177th Street in Manhattan. Park Avenue Funding contributed about $500,000 towards the loan, however the bank later agreed to a accept $2.5 million to pay off the loan and Park Avenue Funding alleges it was wiped out of its position.
In another case, the fund cites a 2006 loan for $2.27 million loan for a property called Condo 64 in Hartford, Conn., where the lender contributed 10 percent of the funds. By September 2009, the bank agreed to forgive $400,000 of the loan balance and allow the borrower to refinance $2.1 million through an entity called American Eagle Credit Union, effectively wiping out Park Avenue Funding’s stake in the loan.
Documents obtained by The Real Deal show the bank previously held at least 10 mortgages secured by property owned by Solomon Dwek, a central figure in a New Jersey corruption probe that resulted in the arrest of several politicians, including the mayors of Hoboken and Secaucus.
In a 2006 letter, attorney Jerold Fuerstein noted that the bank held two mortgages secured by 94 Broad Street in Eatontown, N.J. and 6902 Route 9 in Howell, N.J. The letter concerned a court order involving claims against Dwek, who was being sued by PNC Bank.
Park Avenue Bank officials did not respond to e-mailed questions at press time.