Bank forecloses on Prodigy’s AKA United Nations hotel building

Operator Korman Communities said in December it hoped to reopen site

AKA United Nations at 234 East 46th Street (Google Maps, iStock)
AKA United Nations at 234 East 46th Street (Google Maps, iStock)

UPDATED, Feb. 10 2021, 7:30 p.m.: Canadian Imperial Bank of Commerce has moved to foreclose on a Manhattan hotel building owned by Prodigy Network, a once-prominent crowdfunding firm that has been slowly collapsing for the past year.

In a complaint filed in New York State Supreme Court this week, the Toronto-based lender claimed that the hotel owner — an LLC tied to Prodigy — failed to make interest payments going back to last May, and did not pay the outstanding $81 million principal when the loan matured this January.

CIBC’s plan to foreclose on the building at 234 East 46th Street follows a sobering pattern for Prodigy. The company has lost three other properties to lenders in the past year, and is facing more than a dozen lawsuits from investors, some of whom accuse the company of fraud.

While commercial foreclosures have been banned during the pandemic, New York state’s moratorium prohibiting them lapses on Feb. 22.

Records show that Prodigy secured an $81 million refinanced loan for the building from CIBC in 2015. Lawrence Davis of Shorewood Real Estate Group, Prodigy’s New York development partner, signed the paperwork.

The building was operated as a hotel by Korman Communities under the firm’s luxury AKA brand. Known as AKA United Nations, the project is one of three AKA-branded hotels the firms partnered on, all of which were marketed to Prodigy’s investors. Lawrence Korman signed as a guarantor to the CIBC loan, records show.

But last May, as Prodigy’s legal and financial problems deepened, the crowdfunding firm defaulted on its interest payments, according to the complaint. The next month, it defaulted again, prompting CIBC to offer a forbearance agreement deferring payment until October. But in October, no payment was made. Prodigy’s default “continued thereafter, and continues to date,” the complaint said.

As of Jan. 25, Prodigy owes the outstanding principal amount of $81 million as well as at least $3.2 million in accrued interest, the bank claims.

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Representatives for Prodigy could not be reached for comment. Davis and Korman did not respond to requests for comment. CIBC declined to comment.

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Founded in 2013 by former luxury broker Rodrigo Niño, Prodigy Network raised an estimated $690 million from investors around the world for developments in New York and Chicago. However, as an investigation by The Real Deal shows, the company’s history of misleading marketing, poor corporate governance and questionable investment strategies set in motion a collapse that has been playing out for some time.

Early last year, the company called on investors to cough up $40 million to save two struggling Prodigy buildings, warning them that they risked losing their money in full. Many investors, at that point, had not heard from the company in months.

In May, Niño died of cancer, leaving the company without a CEO. In a recent court filing, his widow said Prodigy was insolvent and had only one employee, a bookkeeper.

Prodigy’s collapse has made it even more difficult for investors to get answers and accountability, a process complicated by the fact that a large number are based overseas. Of the more than a dozen lawsuits filed, Prodigy has responded to only a select few.

“All the people that worked at Prodigy should be put in jail,” William Boulton, an investor in Venezuela, told TRD last year. “They should not be allowed to work in financial services or the financial industry or [any business] related to real estate, ever.”

UPDATE: This piece has been updated to reflect the date the commercial foreclosure ban expires. It is Feb. 22.