Wonder Work Construction sues lender to stop foreclosure
Developer calls auction “predatory attempt” to snatch Upper East Side condo
Wonder Works Construction is not letting an Upper East Side condo go without a fight.
The developer has filed a lawsuit against mezzanine lender Nahla Capital, aiming to block a UCC foreclosure auction for a loan tied to its building at 302 East 96th Street, known as the Vitre.
Nahla Capital hired a team of JLL brokers to market the loan back in October, with the auction scheduled for Dec. 8.
But in a lawsuit filed Thursday in state court, Wonder Works argued the sale was a “predatory attempt to capitalize on the Covid-19 pandemic,” engineered to take over the condo.
The language is almost identical to that in an HFZ Capital Group lawsuit filed last month to stop a mezzanine lender on four of its Manhattan condos from moving forward with a UCC foreclosure auction.
Several other borrowers have taken a similar tact, pinning their arguments on the Uniform Commercial Code’s requirement that foreclosures be “commercially reasonable.” In one case, a New York judge postponed a UCC auction by two months because of the economic conditions.
Wonder Works said in its complaint that the 63-day timeframe proposed by the lender to hold the auction would have been be tough under normal circumstances, but “under the dark cloud of a pandemic” would be “unconscionable.” It asked for the auction to be delayed until April and for the existing terms of the auction to be scrapped.
But Genghis Hadi, managing partner at Nahla Capital, said the loan has been in default since January. “Our many efforts to reach an amicable resolution have failed,” he said in a statement. “We intend to enforce our remedies.”
Ryan Banich of Tsyngauz & Associates, who is representing Wonder Works, declined to comment.
The 21-story Vitre was designed by well-known architect Karl Fischer and features 48 one- to three-bedroom units. Sales launched in 2017, but as of February, only eight had sold.
Marketed as a boutique building, it does not have ultra-luxury pricing. A 522-square-foot, one-bedroom is listed for $795,000, or $1,523 per square foot, and a five-bedroom penthouse is asking $3.4 million. A two-bedroom penthouse asking $2 million, or $1,820 per square foot, recently sold.
Before the pandemic, the developer was “given term sheets to finance and stabilize [the building] as a rental property,” according to the lawsuit. Two sources familiar with the matter said the developer also pitched investors on bulk purchases, but none happened.
Last January, the developer secured a $43 million senior loan and a $24.9 million mezzanine loan from Deutsche Bank AG. After the pandemic hit, Wonder Works defaulted on the smaller loan, the lawsuit said.
This September, Deutsche Bank assigned the mezzanine loan to Nahla Capital, according to court records.
The following month, Nahla notified the developer about the UCC auction, to be held on Zoom.