The development site at 421-431 Kent Avenue and N. Richard Kalikow (site photo source: PropertyShark)
Brooklyn developer Isaac Hager is facing litigation after he allegedly took out a $17 million loan from N. Richard Kalikow’s Alpha Capital, and allowed his terminally ill business partner, Chaim Lax, to personally guarantee the loan, less than a year before his death.
Alpha, a firm controlled by Kalikow’s Manchester Real Estate and Construction, entered an agreement in October 2007, to lend the $17 second mortgage to Kent Wythe 9th Street, a firm led by Hager and Lax, who was at the time suffering from terminal cancer, according the lawsuit filed Nov. 20 in New York State Supreme Court.
In December 2007, the developer paid $42.6 million for a development site at 421-431 Kent Avenue and 464-474 Wythe Avenue in the Williamsburg section of Brooklyn, with plans to build several apartment buildings there, according to PropertyShark.com records and the complaint.
Hager, president of North Development Group, is one of the leading developers in Williamsburg, with a number of projects ranging from the Aurora to 20 Bayard.
Kalikow is most widely known as one of the original partners in the Manhattan House condominium conversion, before he was bought out after a widely publicized legal battle with investment partner Jeremiah O’Connor.
According to the complaint, Kalikow told Hager and his attorney, Irving Alter, that a personal guarantee by Lax was required for him to approve the loan. But, Lax did not attend any of the negotiations, and Kalikow said he was unaware of Lax’s health condition and depended on Alter and Hager to assure him that Lax would be able to fulfill the terms of the loan, particularly the guarantee.
“Hager knew that Lax’s personal guarantee, and, thus anything that would render Lax unable to fulfill his role as guarantor, including Lax’s health, was material to Alpha’s decision to loan any monies to Kent,” Herrick Feinstein attorney William Fried, who represented Kalikow, said in the court filing. “Hager failed to mention any reason why Lax would be unable to fulfill his duties.”
According to the complaint, Lax’s personal guarantee was critical, because his business interests depended upon a “family financial empire” that only Lax could maintain. Lax was the president of Dynamic Diamond and a leading philanthropist in New York and Israel.
Because of Lax’s death, the complaint says, the only way to enforce the personal guarantee against Lax, would be to file suit against his estate.
By August 2008, the developer went into default on the $17 million and Alpha accelerated the loan. Lax passed away Nov. 3, 2008. Following the default, the loan was later transferred to Beta Capital, another firm controlled by Kalikow.
In addition, the complaint alleges that Hager hired consulting firm Moseson & Associates, to help get 421-a tax benefits for the project. The developer set aside $100,000 for those services; the complaint alleges those funds were misappropriated.
Kalikow is demanding a judgment of at least $4 million and at least $2 million in punitive damages. The plaintiff is asking for at least $100,000 in damages related to the use of the 421-a funds.
Alter declined to comment as did Kalikow and his attorney.