Two Florida developers are facing a lawsuit from German lender HSH Nordbank for allegedly hiding millions of dollars in assets after losing a $75 million judgment linked to a condominium project near Daytona Beach, Fla.
In a Dec. 21 lawsuit in U.S. District Court in Manhattan, the lender alleges that investors Brian Street and James Cohen, principals of Deerfield Beach, Fla.-based Boca Developers, borrowed $192 million in December 2005 to develop Marina Grande on the Halifax, a luxury condo in Holly Hill, Fla.
Street and Cohen were notified in April 2008 that the project was in default, and the bank demanded they make good on $40 million in personal guarantees backed by the project, a 486-unit residential condo. But Nordbank alleges in the suit the two investors “saw the writing on the wall” in 2007 when the Florida real estate market was crashing and already began moving assets into safekeeping.
According to published reports, mezzanine lender Cerebus Capital Management took over control of the project and reached an agreement with the lender not to foreclose on the property, while the main lender, HSH Nordbank, which operates its U.S. business from Manhattan, went after the personal guarantees.
The defendants filed an appeal in June 2010, claiming the default was caused by Nordbank and not the defendants, and saying the agreement with Cerebus should have allowed the parties to cancel the judgment.
Attorney Justin Kattan, representing Nordbank, confirmed that there are no other foreclosure suits involving the bank, but said he could not comment further without the bank’s approval.
The bank alleges in the suit that both investors committed fraudulent conveyance by moving millions of dollars in assets to their wives or other family members to prevent seizure.
Street allegedly moved $5 million from accounts held by him or with his wife, into a trust account and an account held by his wife as “tenants by the entirety,” in which neither holder can deal with the account without the other holder’s authorization.
They allege Street and Cohen moved about $20 million from accounts they owned through limited liability companies, into accounts held with their wives or trust accounts where they were the beneficiaries.
Nordbank says it filed suit in 2008 against Street, Cohen and a third guarantor of the loan, and won a $75 million judgment in 2010. The judgment was reduced by $1.5 million in March 2011 when a partial settlement was reached with the third guarantor, investor Michael Swerdlow, but the bank seized several cars, boats and other property owned by Street and Cohen, court documents show.
Boca Developers officials were not immediately available for comment due to the holiday, and lawyers for the defendants were not immediately available for comment.