Take Two: After dismissal, Delshah strikes back with second foreclosure suit against Terzi’s NoMad retail condo

New suit alleges failure to pay off note after maturity
By Kevin Sun | August 05, 2019 04:45PM

From left: Jack Terzi, 31 East 28th Street, and Michael Shah (Credit: Jack Terzi, Delshah Capital and Google Maps)

From left: Jack Terzi, 31 East 28th Street, and Michael Shah (Credit: Jack Terzi, Delshah Capital and Google Maps)

In May, Delshah Capital’s distressed-debt strategy was tripped up when a judge dismissed two foreclosure suits against Jack Terzi’s JTRE Holdings. That decision hinged on a technicality — Terzi had only been given 10 days to fill up the balance in a cash collateral account, when he should have been given 30.

But that wasn’t the end of the story for Delshah. Last Thursday, Michael Shah’s firm filed a new lawsuit to foreclose on JTRE’s unoccupied retail condo at 31 East 28th Street yet again.

“The Note and Mortgage are in default due to the Borrower’s failure to pay all amounts due and owing under the Loan Documents on August 10, 2017, the maturity date of the Note,” Delshah’s complaint states, adding that JTRE has also failed to pay real estate taxes and common charges for the property.

According to public records, the 28th Street retail condo had more than $266,000 in unpaid real estate taxes outstanding this June, and was hit with a lien of common charges from the building’s condo board last January, with an outstanding balance of $9,253 at the time.

Terzi says that his firm has attempted to pay off its debt to Delshah — only to see its offer rejected.

“After the judge dismissed the initial predatory suit in May of this year, we expected to be able to pay off Delshah’s debt. They would not accept a payoff because they do not want a payoff. Instead, they would rather engage in wasteful litigation,” he said.

Terzi said he was confident that “the Judge will again dismiss this new round of frivolous lawsuits, after which we will again attempt to pay off the debt. We have never had an issue with a lender before; this is a serial predatory lender that we intend to defend our rights and prevail once again.”

Meanwhile, for the time being, Delshah is not planning to foreclose on Terzi’s other distressed note at 27 West 72nd Street, according to a source with knowledge of the deal. That retail condo had more than $478,000 in outstanding real estate taxes in June, and was hit with a $42,900 common charge lien last March. Sources familiar with the property say JTRE may still be able to pay off that note by selling the asset.

Delshah’s Tel Aviv Stock Exchange filings value the 72nd Street property at $8.2 million, while the 28th Street property is valued at $4.6 million. The firm picked up notes on the two properties in July 2017 for $6.9 million and $3.9 million, respectively.

In the previous foreclosure suits, Terzi asserted that the originator of the notes, Signature Bank, had “colluded” with Shah to manufacture a default, a claim that Shah rejects.

“The notion that a multibillion dollar public bank and a private equity company would collude to rob him of two non0prime vacant retail condos with $2 million of equity is absolutely ridiculous,” Shah told TRD Monday. “This is nothing more than an attempt to drag out the consequences of his inability to ever lease either asset, and now we will have to hold him responsible personally on his guaranties.”

In addition to the new foreclosure suit, Delshah in mid-July filed two motions for summary judgement against Terzi and an associate, Hagai Laniado, as personal guarantors of notes on the properties. Shah is seeking a judgement of nearly $4 million plus interest for the 28th Street property, and $1 million for the 72nd Street unit. In both cases, the guaranties remain in effect in part because the properties have never been leased.

Mary Diduch contributed research.