Brooklyn development duo faces $51M in property suits

From left: 100 South 4th Street (credit: PropertyShark) and 120 South 4th Street

Two under-the-radar Brooklyn real estate developers are confronting more than
$51 million in personal guaranty and foreclosure lawsuits on five separate loans
doled out in Williamsburg and Greenpoint in 2006 and 2007.

In the largest and most recent legal action, special servicer CWCapital Asset
Management sued the developers, Menachem Stark and Israel Perlmutter, to
recover $29 million lent in 2007 and secured by the seven-story, 74-unit rental
building at 100 South 4th Street,Between Berry Street and Bedford Avenue.

In the CWCapital suit filed in U.S. District Court in Brooklyn June 28, the special
servicer claims the pair personally owes the full $29 million because of a Chapter
11 filing the pair entered in an effort to block a foreclosure proceeding in 2009.

Perlmutter (who also goes by the name Sam Perl) and Stark, claim in 2009 court
papers that they manage 26 properties and have constructed no fewer than 12

But the CWCapital action is far from the only one that lenders have filed against
the two men. Chicago-based MB Financial Bank holds more than $19.4 million
in loans given to the two men as well as to their sometime-partner Eugene
Meyerowitz. And this week, the bank came to market with one of the notes,
which has a face value of $9.2 million.

The legal jockeying and note offerings are part of an accelerating market for loan
with banks such as Brooklyn Federal Savings Bank and Capital One unloading nonperforming loans.

Perlmutter and Stark, who paid the Muschel family $9 million for 100 South 4th
in 2006, borrowed the $29 million
in April 2007. They defaulted on the loan and the lender filed to foreclose in
2009. That action is still pending.

$9M note for sale in active region of Williamsburg

MB Financial is selling the first of at least three loans it acquired when it took
over the failed Chicago-based Broadway Bank, the original lender. The $9.2
million note being offered for sale was given to Perlmutter, Mendlovitz and Stark
in 2007 and was secured by three parcels located along North 9th Street near
Bedford Avenue in Williamsburg where they failed to build residential projects.

The parcel, at 212-218 North 9th Street between Roebling Street and Driggs
Avenue, has 44,500 square feet of development rights; the parcel at 237-243
North 9th Street, between Roebling and Withers streets, has 52,551 square
feet; and the parcel at 261-263 North 9th Street — also between Roebling and
Withers streets but not adjacent to the other site — has 33,450 square feet of
development rights. All those figures are according to

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The parcels between Roebling and Withers streets are adjacent to and part
of the same city block as the property 250 North 10th Street, which developer
LCOR in March bought for $15 million

While MB Financial is selling the $9.2 million note, the bank would not comment
as to whether it would sell the other two notes, one for $6.2 million on 120 South
4th Street in Williamsburg, next door to 100 South 4th Street, or for $4 million at
239 Banker Street in Greenpoint.

David Schechtman, a senior director at investment sales firm Eastern
Consolidated, which is handing the sale for the bank, also declined to comment.
The owners could not be reached for comment or did not respond to requests for
comment, and their attorneys did not return calls for comment.

All three loans are in default and are approximately two years into foreclosure
proceedings in Brooklyn State Court, court records show.

In addition, a mezzanine lender, 77 Charters, claims in court papers filed April
2010 in U.S. District Court in Brooklyn that it is owed $2.5 million, secured by the
North 9th Street properties. That action is also ongoing.

MB Financial holds two other notes where the developers planned residential
projects. At 120 South 4th Street on the corner of Bedford Avenue, they
have partially built a 26,902-square-foot building with 18 units, yet it remains
uncompleted. MB Financial holds a $6.2 million note on the property.

The third loan is at 239 Banker Street, where MB Financial lent the trio $4 million
in 2006. The developers planned to redevelop a 68,200-square-foot loft building
at that location. The city’s Department of Buildings issued a full vacate order for
illegal tenants living there in 2009, city records show.

In January of this year the DOB approved plans first filed in 2006 to convert the
four-story brick building from manufacturing to a hotel.

Note sales are picking up in the city, an investor in the Manhattan and Brooklyn
market said.

“We are definitely seeing an uptick in note deals,” said David Goldban, general
counsel at Pink Stone Capital. “A lot of the deals we are seeing are smaller deals
that have been hanging around. The good deals are going very quickly.”

Pink Stone Capital bought the $50 million note on 111 Washington Street in April, and on July 1 won control of the property,
Goldban told The Real Deal. He declined to discuss financial aspects of the deal
and city records have not yet been published. Pink Stone intends to develop
high-end luxury rentals and some retail at the site, he said.