Crowdfunding firm seeks $30M bailout for second commercial building

Troubled firm battles several lawsuits as it tries to salvage portfolio

Mar.March 19, 2020 07:00 AM
Rodrigo Niño, 17 John Street and 85 West Broadway (Credit: Prodigy Network, Google Maps)

Rodrigo Niño, 17 John Street and 85 West Broadway (Credit: Prodigy Network, Google Maps)

Real estate crowdfunding firm Prodigy Network has staved off foreclosure of its commercial property at 85 West Broadway — for now.

In a letter sent to investors last week, the firm said it had reached an agreement with an affiliate of the Vanbarton Group, a preferred equity holder, giving it until the end of the month to make payments.

But there is a catch: In the letter, Prodigy Network asked investors to contribute $30 million to salvage the building — a 13-story hotel known as “AKA Tribeca” — or risk losing their investments in full.

“The purpose of the capital contribution will be to pay off the Vanbarton Preferred Equity and to provide the necessary capital to reposition and stabilize the property,” the document said.

The letter is the latest in a series of setbacks for the beleaguered firm.

This week, Prodigy was slapped with a lawsuit from two Mexican investors in a commercial building at 17 John Street, which is operated as a co-working space known as “The Assemblage.” In their suit, the investors accuse the firm of refusing to give back their equity and loan investments in the property after Prodigy stopped paying out distributions in June 2019. It is one of several investor lawsuits filed in the past six months.

As its legal troubles play out, the correspondence about 85 West Broadway marks Prodigy’s second attempt in recent months to seek more investor funds. It took the same approach at 84 William Street. Both letters include requests for money and warnings that investors could lose their investments in full.

In correspondence last month with investors in the William Street property — also a hotel branded under the AKA flag — the firm said it was trying to sell the building, and had received an offer of $105 million from Niido, a home-sharing service operated by NGD. However, it remains unclear if any sale — or bailout — materialized.

Prodigy and Korman Communities, which operates the AKA brand, did not respond to requests for comment. Neither did Shorewood Real Estate Group, which also has partnered with Prodigy and Korman on the AKA property and 17 John Street. Both Vanbarton, the preferred equity investor, and Niido, the bidder, were also unresponsive.

In the latest letter, Prodigy said it had engaged Newmark Knight Frank to market and sell 85 West Broadway last September, but it didn’t receive any offers. An August analysis by Newmark Knight Frank, obtained by The Real Deal, valued the property at about $92 million.

A Prodigy joint venture bought 85 West Broadway, formerly known as the Smyth Hotel, in 2017 for about $72.2 million, with the goal of renovating the property, city records and marketing materials obtained by TRD show. The property, as of Newmark’s August analysis, carries $78 million in debt. The development marks the sixth AKA location for Pennsylvania-based Korman.

The property suffered from unanticipated delays in its renovation, which meant the property did not generate enough cash to cover its debt, according to a performance report sent to investors last year. When Prodigy and its partners solicited capital from its investors for the project, they noted in marketing materials that the property, though underperforming, was still generating positive net operating income. The team projected it could double the hotel’s NOI after the renovations.

Prodigy claims to have raised $690 million from thousands of investors around the globe for its developments in New York and Colombia. Prodigy’s website appears to still be actively soliciting funds for two developments in Chicago.

The fate of the company has been in limbo for more than a year, as investors stopped receiving distributions from properties at the end 2018. CEO Rodrigo Niño stepped down from his role last September, and the company’s succession plan remains unknown.

Write to Sylvia Varnham O’Regan at [email protected] and Mary Diduch at [email protected]

Related Articles

From left: 84 William Street, Rodrigo Niño and Larry Davis of Shorewood Property Group (Credit: Google Maps)

Crowdfunding firm to investors: Cough up $40M or lose it all

CrowdStreet CEO Tore Steen (Credit: iStock)

CrowdStreet hits $1B milestone, crowdfunding firm claims

Rodrigo Nino, 84 William Street in Lower Manhattan and 1400 N. Orleans Street in Chicago (Credit: Facebook, Google Maps)

Prodigy Network investors say millions in limbo as company shuts them out

Cadre founder Ryan Williams and Allen Smith

Cadre brings on former Four Seasons CEO as president

As crowdfunding startups rethink their business model, many are becoming more like traditional real estate investment firms (Credit: iStock)

To survive, crowdfunding firms are remaking themselves

305 East 46th Street (Credit: iStock)

Japanese firm lands $84M financing for Midtown East buy

Rodrigo Niño (Illustration by Nazario Graziano)

Panic at Prodigy

Crowdfunding: Crowded out?

Crowdfunding: Crowded out?