From left: Magnum Real Estate Group President Benjamin Shaoul, parking garage at 140 West 28th Street and 146 West 28th Street (property source: PropertyShark)
Developer Benjamin Shaoul filed a $15 million lawsuit last week against
Sovereign Partners and its principals, brothers Darius and Cyrus Sakhai, as
well as troubled lender Brooklyn Federal Savings Bank, claiming they derailed his deal to buy back his defaulted note on a
Chelsea development project at a steep discount.
The suit claims Shaoul worked out an arrangement with former basketball star
Earvin “Magic” Johnson’s real estate investment venture Canyon-Johnson Urban
Funds to pay Brooklyn Federal $13 million to buy
back his own defaulted mortgage on the mixed-use property at 146 West 28th
Street valued at $27.98 million in principal and interest.
Shaoul, president of Magnum Real Estate Group, was an active residential
developer in the boom, building projects such as the Yves in Chelsea at 166
West 18th Street, the A Building at 421 East 13th Street and 636 East 11th Street.
The suit, filed in New York State Supreme Court Sept. 1, says Shaoul, his sister
Elizabeth and partner Marc Ravner were so confident in the deal, that in the first
months of this year they “made their positive feelings known in the local Persian community (a tight-knit
group of Iranian Jews that includes the Shaouls and Sakhais), and it became
common knowledge that a settlement had been reached.”
But instead the bank sold the note in May to Sovereign for $13.5 million. The
note and judgment are secured by the 26,296-square-foot mixed-use property
at 146 West 28th Street and an additional 66,800 square feet of available
development rights, according to marketing material from commercial brokerage
firm Marcus & Millichap.
“The Sakhais were thought to be friends of the Shaoul family, but they turned out
to be mischievous and cunning opportunists,” the lawsuit says.
The court papers allege breach of contract and interfering in contractual
relations, among other claims, and the plaintiffs are seeking $15 million in
damages.
However, such claims are common in civil disputes and could not be verified, and
neither side would return calls seeking comment. Brooklyn Federal and Canyon-
Johnson did not return a request for comment.
Furthermore, one source familiar with the dispute said the deal collapsed in part
because Canyon-Johnson was not “comfortable” enough with the deal to go
forward.
The fight is an unusual display of public discord in the influential Persian
community, centered around Great Neck, L.I., which includes major developers
such as Joseph Moinian and the Elghanayan brothers.
In January 2008, Shaoul’s company paid $18.9 million for the mixed-use building
at 146 West 28th Street, and borrowed $22.75 million from Brooklyn Federal,
city property records show. That entire loan was personally guaranteed by
Elizabeth, the suit says. The developers later signed a long-term lease to control
the neighboring parking lot at 140 West 28th Street, and paid $5.6 million for air
rights from neighboring apartment buildings.
Sources said Shaoul planned to build a hotel at the site, which is zoned for
manufacturing, but another source said he was close to getting a residential
variance.
Ultimately, the loans went into default, Brooklyn Federal sued in November 2009,
and it won a judgment which was entered for $27.98 million in June 2010.
The bank hired commercial brokerage Marcus & Millichap to market the loan
last fall, receiving offers of about $11 million, Shaoul’s suit says. The developers
agreed to pay $13 million, and, under pressure from the bank to find a new
partner, teamed up with Canyon-Johnson Urban Funds.
On Feb. 22, Canyon-Johnson signed an agreement with the bank to buy the note
for $13 million, the court filing says. After Canyon-Johnson purchased the note,
Shaoul’s group would pay Canyon-Johnson $13 million, as part of a larger plan to
form a joint venture to re-start development at the site, the court papers say.
But that plan was ended on March 21 when the bank terminated the purchase
agreement, and inked a new deal for $13.5 million with Sovereign seven days
later. The purchase was finalized May 6, city property records show.
Sovereign filed a lawsuit July 28 to foreclose on the judgment, now valued at $29
million. That case is still pending, court records show.