Raphael Toledano is going to Bankruptcy Court to try to regain control of an East Village property he claims Delshah Capital’s Michael Shah “commandeered.”
The controversial 27-year-old landlord filed for Chapter 11 bankruptcy protection for the property at 97 Second Avenue between East 5th and 6th streets, the Commercial Observer reported.
Toledano, who paid around $5 million for the six-story, 10-unit rental property in 2014, claims he owned 100 percent of the equity in the property and pledged the interest to Benjamin Lefkowitz of Lefko Funding as collateral for personal loan obligations.
Lefko claimed earlier this year that Toledano defaulted on the note and challenged the foreclosure sale in court. An agreement was drawn up that gave Toledano 75 days to sell the property, according to the publication.
Meanwhile, Delshah announced on July 21 that it had acquired the defaulted note on the property and was working with the owner to take control at 30 percent below market value. Shah bought the note in April for $9.2 million, the CO reported.
But Toledano’s property restructuring manager claims that during the 75-day window, Shah got Lefko to sign Toldano’s interest over to him and re-deeded the property to himself or an entity he controls.
Adam D. Stein-Spair, a bankruptcy expert at Pioneer Funding Group who is not involved in the case, said that if true, the claim means that the debtor “is effectively an empty shell.”
Shah did not respond to the CO’s request for comment.
In May, a federal bankruptcy judge approved Madison Realty Capital as property manager of 15 of Toledano’s troubled East Village buildings. The court is set to approve a sale of the deeds to Madison by the end of the third quarter. [CO] — Rich Bockmann