UPDATE, Sept. 30 2020, 2 p.m.: Brooklyn developers Joseph Brunner and Abe Mandel are caught in a foreclosure lawsuit involving close to $20 million in mortgages for a Bushwick building.
The lender, Benefit Street Partners Realty, charged in a suit filed in New York State Supreme Court that the developers, operating as 121 Morgan Holdings and Morgan BMB, defaulted on three mortgages totaling $19.75 million. The developers also allegedly failed to meet multiple deadlines to complete improvements to the former manufacturing facility at 121 Morgan Avenue.
“This is a mortgage foreclosure action brought by a lender that has bent over backwards — time and again — to accommodate a defaulting borrower that has opted to look a gift horse in the mouth,” court documents read.
Brunner and Mandel are known together as Bruman Realty, one of the biggest landlords in Brooklyn. Most recently, the firm reportedly sold a portfolio of about 1,275 residential rental units to KKR and Dalan Management for around $860 million.
Brunner is named in the suit for his role as principal of Morgan BMB, and Mandel as guarantor of payments. Their co-defendants include Joseph Tabak and Toby Mandel.
Stephen Meister, an attorney for 121 Morgan Holdings, said in a statement that the lawsuit is an “outrage.” He claims it stems from Benefit Street’s displeasure over the borrowers’ refinancing of another mortgage held by the firm, though he declined to specify which one.
The Real Deal previously reported that Brunner’s Bruman Realty secured a $130 million refinancing deal with Starwood Mortgage Capital for a large multifamily development at 871 Bushwick Avenue, consolidating multiple loans, including ones from Benefit Street.
Ethan Kobre, an attorney for Benefit Street, and representatives for the firm itself did not respond to a request for comment. But in the absence of a response in court from the developers, Kobre filed a new motion on Sept. 27, seeking a default judgement to resolve the case in favor of Benefit Street.
The court filing said that the developers agreed to a July 1, 2019, “completion date” for “Phase I” improvements to the Morgan Avenue building, which has been marketed as a “high-end retail space,” according to listing websites.
After failing to meet the initial deadline, the developers asked for an extension, which Benefit Street granted. But, the lawsuit alleges, they again failed to meet multiple deadlines, and the lender ultimately offered to push back the minimum interest payment date and loan maturity date as long as the borrowers agreed to “certain provisions,” although those were not specified. The borrowers refused to accept the offer, leading to the ongoing dispute.
When Benefit Street notified the defendants of their various defaults, the borrower “essentially thumbed their nose at” the lender, “vowing to exploit the upheaval created by the Covid-19 pandemic to continue their defaults” even though they missed completion deadlines even before the pandemic, according to the lawsuit.
Kobre, Benefit Street’s lawyer, wrote in the filing that the lender made accommodations for the borrowers based on their reputation as “respectable and sophisticated real estate owners and developers” but was “rewarded” by “multiple willful defaults.”
Meister disagreed with that characterization of what happened, and said borrowers in June requested that Benefit Street issue a payoff letter so they could pay back the mortgages in full through refinancing. He claimed that Benefit Street wanted to charge more interest than the loan agreement called for in retaliation for not getting more deals from the developers.
“We believe the court will see Benefit Street’s actions for what they are — reprehensible, vindictive, predatory, and illegal,” Meister said. “They won’t take what they are owed.”
Benefit Street was also recently involved in a legal dispute over the Williamsburg Hotel. After Toby Moskovits’ Heritage Equity Partners defaulted on a $68 million loan from Benefit Street, the hotel was placed in receivership.
CORRECTION: A previous version of this article identified Joseph Tabak and Toby Mandel as co-plaintiffs in the lawsuit. They are co-defendants, along with Joseph Brunner and Abe Mandel.