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Terra Capital claims RedSky founders owe it $12M
Investor claims it rescued developer’s projects but didn’t get paid
Bad news for the Bens.
After carrying two multifamily developments across the finish line in Williamsburg, investor Terra Capital Partners wants recompense from RedSky — plus a return on its equity.
The private equity shop is suing RedSky founders Ben Bernstein and Ben Stokes for allegedly failing to pay investment returns or finish construction at 625 and 658 Driggs Avenue.
Terra’s lawyers told a Manhattan court this week that Bernstein and Stokes owe it nearly $12 million, citing personal guarantees and “extensive delays in construction and cost overruns” that led to Terra taking over the project from RedSky.
The saga began in 2018 when Terra gave RedSky $8.2 million in exchange for interest payments and a promise to reclaim the principal in two years. But RedSky began missing payments in the summer of 2020, and Terra later wrested control of the project through a limited liability company, RS JZ Driggs, according to the lawsuit.
Terra was in the driver’s seat, but now also responsible for the project’s costs.
According to a September letter to RedSky, its carrying costs came to $17.2 million for servicing debt from the senior lender and hiring BroadStreet Development to finish the five- and six-story buildings, which have 39 apartments and several ground-floor commercial units altogether.
Terra claims that it “supervised construction, worked with lawyers, brokers, expediters, and others, and poured additional capital into [RS JZ Driggs LLC] …to pay other operating expenses such as property taxes and insurance premiums,” and that Bernstein and Stokes personally guaranteed any funds needed to finish the project.
The development was hardly a sinkhole. Terra sold the buildings for a combined $42 million this year, repaid senior lender M&T Bank some $29 million and recouped its original $8.2 million investment, according to court filings.
Bernstein and Stokes did not reply to a request for comment.
The Benjamins’ run in real estate has been one of twists and turns. After amassing a large retail portfolio in Brooklyn with cheap money from a family connection, their business partner, JZ Capital, was prepared to write down the value of RedSky’s portfolio by as much as a third, or $150 million, in 2019.