From left: Allen Street Hotel construction photo (credit: Curbed) and a rendering of the project
DAB Group is facing a foreclosure suit at its stalled 16-story Allen Street
Hotel project on the Lower East Side, after the loan was acquired by
Manhattan-based Maverick Real Estate Partners.
Maverick acquired a $5.5 million note from Brooklyn Federal Savings Bank,
after DAB, a Valley Stream, N.Y.-based developer, allegedly went into
default, according to the complaint filed July 1 in Manhattan Supreme Court.
The loan had an initial due date of June 1, 2008, with an optional extension
to December 2008. In August 2008, DAB received an extension until Sept.
1, 2009, with three six-month extensions, until March 1, 2011.
On March 23, the lender advised DAB that it would no longer extend the
loan at the site, at 139 Orchard Street, then sold the debt to Maverick Real
Estate, which acquired the note through an entity called Orchard Hotel.
“The original lender gave the borrower the opportunity to work things out,”
said David Scharf, attorney for Maverick. “They sold the loan. It’s going to
be a pretty much straightforward foreclosure.”
Maverick asked the court to appoint a receiver, alleging the property was not
being properly secured after the loan default.
The project stalled after a flurry of development activity in the
neighborhood, including new hotels, restaurants and residential buildings
prior to the market crash.
The property was scheduled for a July 2008 auction, according to PropertyShark.com.
According to the complaint, Ben Zhavian, owner of DAB, promised to pay a
$19 million building loan by Sept. 1, 2009, which also had three six-month
extensions, until March 1, 2011.
The developers allegedly incurred further default as millions of dollars of
mechanics liens were filed against the property by unpaid contractors, and
the group insurance policy at the property was canceled.
Manhattan-based Misrahi Realty listed the property for sale for $39 million
in cash, or $398,000 per room. Officials at the brokerage declined to
comment, as did Maverick officials.
William Wallace, attorney for DAB Group, declined to comment, saying he
had not yet seen the complaint.
As of June 17, the developers owed $7.96 million in unpaid loans, interest
fees and other charges, according to the complaint.