When the young development firm Minuit Partners paid about $8.5 million for
two notes secured by three small walk-up apartments on the Upper East Side, it
expected a little pushback from the owner when it tried to obtain the titles.
In fact on Monday, a New York State Supreme Court judge turned down a
request made by Minuit for a temporary restraining order that would have
blocked the property owner, Uri Foxbruner and his UES DE LLC, from signing
new leases. But in a hearing scheduled for May 18 it may grant a request for a
receiver.
This kind of pushback is happening all over town, after note buyers try to
dislodge owners struggling to hold on to small and mid-sized properties which
have swallowed millions of dollars of developers’ personal money.
But after Minuit took a closer look, in its attempt to foreclose on $14.6 million in
principal and interest on the buildings 1711 First Avenue, 1713 First Avenue and
354 East 89th Street, owned by UES DE LLC, it found a far more complex
story.
Laid out in an ongoing lawsuit filed in mid-February, Minuit, headed by Jason
Enters and David Cheng, alleges Foxbruner committed a multi-million mortgage
fraud when it applied for loans from Brooklyn Federal Savings to finance its
acquisition of the properties in December 2008.
Foxbruner, through his attorney Thomas Kearns, a partner at Olshan Grundman
Frome Rosenzweig & Wolosky, stood by the loan applications.
“My client categorically denies any allegation of fraud,” he said.
In addition, Foxbruner will continue to fight for the buildings, which he says are
worth more than the debt, perhaps as high as $16 million, Kearns said.
Minuit’s timeline begins before Foxbruner bought the properties. The suit claims
that while public records show Foxbruner’s UES DE LLC paid $14.45 million
for the properties, financed by two loans totaling $10.84 million, from Brooklyn
Federal Savings Bank, the real purchase price was lower allowing him to get a
relatively higher loan.
In addition, Minuit alleges Foxbruner lied about having a $6.75 million interest
in a group of 10 rental apartment buildings owned by an affiliate of Baruch
Singer, including 370 West 127th Street and 171 Morningside Avenue, both in
West Harlem. In fact, the suit charges, Foxbruner has no ownership in those
properties. Singer did not respond to calls for comment. Kearns said he has
seen the ownership papers, and “from the documents I have seen, he owns an
interest.”
In addition, the suit Minuit filed claims Foxbruner lied about the value of several
smaller residential properties. In total, he claimed a total net worth of $19.7
million, when in reality he had assets worth no more than $10.8 million, the suit
says. Banks use personal assets to determine how much money can be lent
based on the borrower’s ability to repay the debt.
In 2009, the city’s Department of Buildings approved Foxbruner’s plans to build a
21-story residential building at the site, and he began vacating the tenants in the
three buildings. But the economy soured and the buildings remain standing with
just five tenants among them. In April 2010, the bank declared a default, then
began foreclosure proceedings in June 2010.
In January 2011, Minuit bought the two notes from the Brooklyn bank, and
stepped in to foreclose on the larger mortgage. But after researching the loan
application, Minuit decided to file the second lawsuit on the smaller loan, with
a value of $1.24 million. That suit was filed in February, and Foxbruner filed his
response in late March.
Enters and Cheng, both former Madison Capital executives, formed Minuit
Partners in 2009.
Minuit and its partners own about a dozen properties including 415 East 78th
Street, Enters told The Real Deal. In addition, the firm is in contract to pay as
much as $20 million for seven buildings known as the Arthur Brown estate on
the Upper East Side, which includes 1144-1150 Second Avenue and is being
marketed by David Schechtman of Eastern Consolidated. The asking price is
$26 million.