Starwood suing HFZ for $157M over co-op conversion loan default

HFZ also failed to abide by forbearance agreement for debt payment on the century-old UWS building, according to federal suit

New York /
Oct.October 16, 2020 04:49 PM
Starwood Capital CEO Barry Sternlicht, the Chatsworth at 344 West 72nd Street and HFZ Capital chairman Ziel Feldman (Google Maps; Getty)

Starwood Capital CEO Barry Sternlicht, the Chatsworth at 344 West 72nd Street and HFZ Capital chairman Ziel Feldman (Google Maps; Getty)

Starwood Property Trust is suing Ziel Feldman’s HFZ Capital Group, charging the developer defaulted on loan payments at an Upper West Side co-op conversion and failed to abide by a forbearance agreement.

Starwood— through SPT Chatsworth Holdings — is seeking $157 million, according to the federal suit it filed Tuesday in New York. The company alleges that HFZ, Feldman and his wife, Helene are in default on the senior and mezzanine loans, an unsecured loan and an inventory loan obligation for the Chatsworth, a century-old building at 344 West 72nd Street. The inventory loan was supposed to be used to buy shares in the co-op.

In a statement on Friday, Starwood said it is “in active discussions and the matter may be resolved in a matter of days.”

The balance of the unpaid loans were due in January, according to the suit. Under its contract with Starwood, HFZ was required to purchase the unsold units in the co-op within 45-days of a default, which it failed to do, according to the complaint.

The suit follows an August forbearance agreement between HFZ and Starwood. According to that deal, HFZ agreed to make installment payments totaling $9.1 million between Aug. 17 and Oct. 28. Starwood alleges HFZ missed those scheduled payments on the forbearance agreement.

Starwood alleges that Nir Meir, a managing principal at HFZ, told the company he sent two separate wire transfers to fund past-due payments. But Starwood said it never received the money. On Sept. 4, Starwood legal counsel told HFZ it was in default of the forbearance agreement, according to the complaint.

An HFZ spokesperson called the Starwood allegation “inaccurate.” The spokesperson added that “wire transfers were sent and received by Starwood and Starwood applied those funds in accordance with the loan docs, including payment of interest and legal fees.”

The company declined to comment further on the lawsuit.

HFZ bought the Chatsworth in 2013 for $150 million and quickly sought to convert the 147-unit Beaux-Arts rental building into co-ops.

Some of the units at the building were rent-stabilized, and HFZ tried to buy out those renters. In 2017, HFZ sold 46 of the building’s rental units for $38 million to an entity linked to the Safras, a Brazilian banking and real estate family from Brazil.

Over the years, HFZ has purchased a number of historic Upper West rental buildings and converted them into co-ops or condos. But the company has run into trouble with its loans on a few of these buildings.

Last month, CIM Group tapped a brokerage to market junior mezzanine loans tied to four of HFZ’s New York condominium projects through a foreclosure sale.

HFZ’s other major projects include the XI, a mixed-use condo and hotel project near the High Line, and the Belnord, a storied Upper West Side rental building that the developer converted into a 95-unit condo project.


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