The Real Deal New York

Futterman claims RWN ran roughshod over sham auction for distressed Harlem site

Developer alleges that his lender colluded to suppress the value of his property
By Rich Bockmann | July 03, 2018 02:25PM

300 West 122nd Street (Credit: Curbed NY)

Hans Futterman is heeding the adage, “Follow the money.”

The developer is trying to build a paper trail that he believes will show his lender, Ari Shalam’s RWN Real Estate Partners, held a sham bankruptcy auction last year for his Harlem development site, court records show.

Futterman alleges that RWN and the bankruptcy case’s wind-down officer worked to chase off potential bidders who would pay a fair-market price for the property. The developer further claims that RWN then pressured the only other bidder at the auction to drive the price down, only to turn around and flip the property for a fat profit.

“RWN was in the final stages of its ‘loan to own’ scheme, and had fixed the process in order to acquire control of the project for itself or its affiliate or to sell it to a third party and reap the benefits of my thirteen years of hard work, creativity and risk,” Futterman wrote in bankruptcy filings in New York’s Southern District court.

He declined to discuss the case when reached by The Real Deal, and representatives for RWN did not immediately respond to requests for comment.

Futterman lost control of 300 West 122nd Street, where he planned a 127-unit residential project, after defaulting on RWN’s $36 million loan in June 2016. RWN — the real estate arm of Apollo Global Management co-founder Marc Rowan’s family investment firm — then bought the property at auction for $48.6 million last November.

Sources told TRD that RWN is in contract to sell the site to the only other bidder, Crown Heights-based developer Happy Living, for around $70 million.

Futterman claims that Rowan, Apollo and RWN used their “special relationship” with JPMorgan to obtain $100 million in financing to be assigned to Happy Living for the acquisition. In April, Futterman sent a subpoena to the bank requesting documents he believes will support his collusion claims.

A spokesperson for JPMorgan declined to comment for this story, saying the bank was still looking into the allegations.

Further, Futterman said in court filings that RWN and Esther DuVal, the wind-down officer, intentionally made it difficult for other parties to qualify as bidders for the auction in the first place. Third-party bidders were given a shorter window to close on a deal and had to meet a minimum purchase price — conditions that didn’t apply to RWN, according to Futterman.

Bob Knakal, who at the time was working for Cushman & Wakefield and marketing the property, wrote to RWN’s attorneys that interested parties generally had the feeling that “given the way the mechanics are working, it is clear that the lender wants to take the property back,” according to an email attached to the bankruptcy case.

And as bidders were scrambling to get qualified just minutes before last year’s auction, Knakal wrote to a Cushman colleague, “WTF? This seems corrupt…”

DuVal, who did not respond to a request for comment, wrote in court papers that she ran a fair process, and accused the developer of manipulating “hearsay and clever parading” before the court.

Futterman, she said, claims to be “on the precipice of an ‘A-ha!’ moment,” but is relying on “little more than reckless invective.”

Rachel Medalie, who runs a division of Happy Living and is also a broker at Douglas Elliman, said the company is aware of the claims in Futterman’s latest filing, “which, as it pertains to Happy Living, has absolutely no merit.”

Attorneys for RWN stated in court papers that the company did not know Happy Living and its principal, Levi Balkany, before the auction. They pointed to an email exchange following the auction in which Balkany is discussing a deal for the property.

“Of course, if the parties had a pre-auction agreement,” RWN’s attorneys wrote, “it would make no sense for Mr. Balkany to suggest that they could ‘talk a deal’ in the future.”