Judge appoints receiver on Eli Karp’s Flatbush property

Greystone alleges Karp defaulted on a $34.5 million loan

Eli Karp with 271 Lenox Avenue
Eli Karp with 271 Lenox Avenue (Getty, Apartments)

On the heels of losing an apartment complex in Flatbush to a foreclosure, Eli Karp’s Hello Living faces the loss of another building in Brooklyn.

An affiliate of Greystone filed a lawsuit in August to foreclose on Hello Living’s 55-unit building at 271 Lenox Avenue after Karp defaulted on a $34.5 million loan. Last week, a judge appointed a receiver who will collect the earnings, revenues, and rents from the property.

Karp’s Hello Living bet on potentially up-and-coming areas of Brooklyn as demand for housing around the borough soared, but the developer has faced a hard time of late. In September, Karp lost control of his project at 1580 Nostrand Avenue in a foreclosure to his mezz lender Arch Companies.

Karp has blamed lenders for his woes.

But in the case of 271 Lenox, Karp has been negotiating the terms of his loans for years.

In 2015, Investors Bank originated a $17.9 million loan on the property. The note was then sold to Madison Realty Capital, which provided an additional $10.5 million mortgage. Madison sold the loans to Greystone in 2019, and the debt was then modified six times. The lender alleges Karp failed to make payments in April.

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The lender also alleges that Karp, who guaranteed the loan, again ran afoul of its terms when a lien was filed against his ownership interests in the property. The lien was filed in November 2021 by iCrossFund 4, according to the lawsuit.

The lender’s attorney also alleged that Karp was diverting over “$170,000 monthly in net operating income to other purposes.”

Karp’s attorney argued the default was invalid and that Karp used his ownership interests as collateral to obtain a mezzanine loan.

It was only after the lender’s bad faith conduct that Karp suspended payments to the lender, Karp’s attorneys said in a filing.

In a filing, Karp, who said he was delayed in filing an affidavit because he was in the hospital, called the defaults “manufactured” by lenders and argued a receiver should not be appointed.

The judge didn’t buy it, and instead appointed the receiver last week. The foreclosure remains pending.

Karp did not immediately return a request for comment. An attorney for Greystone also did not return a request for comment.