Lender to Harlem developer: Pay back $26M loan plus fees

Lawsuit says interest on debt accruing at a rate of $17K per day

New York /
Dec.December 08, 2020 07:30 AM
308 W. 133rd Street (Google Maps, iStock)

308 W. 133rd Street (Google Maps, iStock)

UPDATED Dec. 8, 2020, 9:05 a.m.: If you think the interest charges on your loans are bad, try racking up fees of $17,000 per day.

That’s what developer Levi Balkany of Happy Living Development is facing after allegedly defaulting on a $26 million loan for a 46-unit condo building in Harlem.

An entity associated with lender Arena Investors filed a motion in New York State Supreme Court last week calling for summary judgment against Balkany, who personally guaranteed the loan last year.

According to court records, the lender issued the $26 million loan to refinance an existing construction loan and finish work on the project at 308-310 West 133rd Street. A short time later, the developer defaulted and “refused to make the required payments,” per the lawsuit.

The lender is now calling for all principal, interest and fees owed under the loan to be paid back, totaling $35.7 million, with interest accruing at a rate of $17,333 per day.

“This is a case where a short-sighted lender will take away the ability of both lender and debtor to make a profit,” said real estate attorney Adam Leitman Bailey, whose firm is representing Balkany.

Arena Investors did not respond to a request for comment.

When he secured the loan, Balkany told Arena he had eight units in contract and two more offers out. However, the developer fell into default six weeks later and failed to deliver a temporary certificate of occupancy by the agreed-upon time, despite adjustments to the loan terms, the lawsuit claims. The lender also accuses Balkany of leasing units at the building, a violation of the loan agreement.

In response, Balkany blamed the delay in getting a TCO on the city, which did not issue the certificate until last July, according to court records.

He said buyers had been offered a chance to rescind their contracts the month before, as required by law when a condo doesn’t meet its projected first year of operation. Five buyers took him up on the offer, meaning the building fell under the “effective” threshold — a term used to describe when 15 percent of units are in contract — and closings couldn’t begin. Last November, with no closings in site, the developer canceled the remaining contracts.

Balkany contacted Don Moses, Arena’s managing director of real estate, about renting the units in the building, but the lender refused.

“If you let me rent it and get the tax abatement, we can be in a much better position to sell,” Balkany wrote in an email to Moses. “Don’t you understand an empty building is a disaster?”

While many lenders have been working with distressed developers over the past year, some are now taking a more hard-line stance as talks break down. In the past month, mezzanine lenders on Wonder Works’ Vitre condo on the Upper East Side and on four of HFZ’s Manhattan condos have commenced UCC foreclosure proceedings, with both developers condemning the actions as predatory ploys to take over their buildings.

“I am trying everything and anything,” Balkany said in his email to Moses. “I went to a bunch of bunch of veterans in the business who told me to wait and you will take much less in a few months.”

“Basically no one is writing me a check.”

UPDATE: An earlier version of this article stated that Arena Investors is seeking a total of $31.2 million from Levi Balkany. It is seeking $35.7 million. 





    Related Articles

    arrow_forward_ios
    Community Development Corporation of Long Island CEO Gwen O'Shea (CDCLI, iStock)
    Nassau County aims to salvage $6M rent relief program
    Nassau County aims to salvage $6M rent relief program
    Senator Chuck Schumer and 70 Prospect Park West (Google Maps, Getty)
    Schumer blasts Brooklyn landlord as NY pols vow to pass good cause eviction
    Schumer blasts Brooklyn landlord as NY pols vow to pass good cause eviction
    Dick Cavett and the property in Montauk (Compass, Wikipedia)
    Dick Cavett sells estate for $24M in priciest Montauk deal this year
    Dick Cavett sells estate for $24M in priciest Montauk deal this year
    Prologis Chairman and CEO Hamid Moghadam (Getty, Prologis)
    Industrial space “effectively sold out” amid leasing frenzy, Prologis says
    Industrial space “effectively sold out” amid leasing frenzy, Prologis says
    Judge trashes 421a rent overcharge suit against Muss
    Judge trashes 421a rent overcharge suit against Muss
    Judge trashes 421a rent overcharge suit against Muss
    Low interest rates and the capability for some to work from home is helping fuel the market for vacation homes, a new survey indicates. (iStock)
    Pandemic continues to fuel demand for second, third homes
    Pandemic continues to fuel demand for second, third homes
    Widow of late General Electric CEO Jack Welch buys $23M UES mansion
    Widow of late General Electric CEO Jack Welch buys $23M UES mansion
    Widow of late General Electric CEO Jack Welch buys $23M UES mansion
    Ty Warner and Four Seasons 57 East 57th Street (Getty, Google Maps)
    Ty Warner’s Four Seasons Hotel sues tenant over $2.7M of missed rent
    Ty Warner’s Four Seasons Hotel sues tenant over $2.7M of missed rent
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...