The Real Deal New York

Jona Rechnitz booted as partner on commercial property in Borough Park

Controversial investor reportedly skipped town
By Rich Bockmann | July 13, 2017 08:00AM

5002 13th Avenue and Jona Rechnitz

JSR Capital’s Jona Rechnitz, self-exiled to his native California as allegations of political and business scams continue to spread, has been booted as the general partner on a Borough Park property that fell into default under his watch, sources told The Real Deal.

The remaining investors, meanwhile, recapitalized and refinanced the highly levered office-and-retail property known as Solomon Plaza, and claim that it’s now on solid footing.

“They de-levered and brought in more capital . . . almost as much as their original investment,” said new general partner Charles Herzka of North End Equities, who declined to comment on Rechnitz’s legal troubles and the investors’ decision to remove him from the property.

Calls to JSR Capital’s Midtown office went unanswered Wednesday. Earlier this week it was reported that Rechnitz skipped town for the West Coast after he was implicated last month in a $70 million Ponzi scheme involving “Hamilton” and Super Bowl tickets. Rechnitz is also set to testify later this year in federal prosecutors’ case against three New York Police Department officers accused of accepting bribes from the JSR chief and his business partners in exchange for favors.

And he was at the center of a now-defunct investigation probing $41,650 worth of contributions to Mayor Bill de Blasio’s election campaign that Rechnitz bundled from members of his inner circle, including Manhattan jeweler Yaron Turgeman.

Turgeman also happens to be the largest investor in the 32,000-square-foot Solomon Plaza office-and-retail building at 5002 13th Avenue in Borough Park, according to a mezzanine-loan agreement the partners signed when they purchased the building in 2015 for $25 million.

Rechnitz acted as the general partner on the deal for a group of limited partners including Meridian Capital Group’s Ralph Herzka – a relative of North End’s Herzka – in landing a $15 million senior mortgage and $7.75 million in mezzanine debt from RCG Longview to finance the building. That represents a loan-to-cost ratio on the purchase price of more than 90 percent.

But on May 1 the borrowers defaulted on both the senior mortgage, which RCG assigned to Signature Bank soon after the building was purchased, and the mezz piece. About two weeks later, the lenders sold the notes on both pieces to Moshe Piller of MP Management, another Borough Park investor with a checkered history, who moved to foreclose.

MP Management, it just so happens, is an office tenant on the second floor of Solomon Plaza, and Rechnitz fought back in court, claiming that Piller hadn’t paid his rent in months and was $52,000 in arrears.

“Despite systematically shirking his own financial obligations as a tenant in the property, [Piller] now claims to have found sufficient resources to acquire both the mezzanine loan and the senior debt and now seeks, with unclean hands, to steal the property away from the property’s good faith investors,” his attorneys wrote in a lawsuit filed in Brooklyn Supreme Court in July.

Rechnitz further argued that handing over control of the property to Piller would harm investors and tenants alike, pointing out that – among many allegations of being a slumlord – Piller is the owner of the Bronx building where two children were killed in a radiator accident in December.

Rechnitz claimed he had worked out a plan to set the property straight, having raised $3.5 million through capital calls to the existing investors and lining up $19 million in new debt when Piller executed a scheme to steal the property.

The JSR founder said Piller scheduled a foreclosure auction to be held on the steps of the state Supreme Court house in Lower Manhattan – instead of in Brooklyn, where the property is located – and sent notice right at the start of the three-day Jewish holiday of Shavout when members of the Orthodox community are prevented from working.

Rechnitz called it a “tactical and hardly coincidental” move designed to ensure that Piller would be the only bidder. But the sale never took place, and the investors were able to pay off the outstanding debt and refinance the property.

At the tail end of June, North End Equities’ Herzka secured a $16.5 million loan from New York Community Bank, property records filed with the city Wednesday show.