Ezra Unger is once again facing foreclosure on his nearly finished luxury condo development in South Williamsburg.
DW Partners restarted the foreclosure process on 427 Marcy Avenue, a 25-unit project intended to house Hasidic families. Unger’s company owes $31.5 million in unpaid debt, the lender claims.
New York-based DW Partners first tried to foreclose on the property late last year, but was stalled by two last-minute lawsuits. One was filed by Unger, who argued the dispute must be litigated in the rabbinical court Beth Din rather than civil court because of an agreement between 19 of the project’s investors who were members of the Williamsburg Hasidic community.
“The investor agreements are sworn to before God, subject to religious law, and may only be interpreted and contested in the religious courts known as the Beth Din,” Latisha Thompson and Y. David Scharf, attorneys at Morrison Cohen who at the time represented Unger, wrote in a complaint filed last year. (It is unclear whether the case ever went to religious court).
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The attorneys added that if the project is foreclosed upon it could come under the control of a new management team that doesn’t understand the local Orthodox community. The lawsuit noted that the project includes balconies designed to accommodate sukkahs for the Jewish festival of Sukkot.
“Given the design of the projects and their intended use, the viability of the projects requires someone with knowledge of and a vested interest in the community,” the complaint stated.
The other lawsuit, filed by Kosher bakery owner Aron Lebovits, alleges Unger took advantage of him — a small business owner with the equivalent of an eighth grade education — to seize control of the project. Lebovits, who filed the suit with his wife, Goldie, argued he was the property’s true owner.
“Unger preyed on the plaintiffs, who were simple people without any real education, manipulated them to trust him and lied to advance his scheme,” the Lebovits’ complaint read.
Both suits were filed on the same day last December. A New York state judge ruled for a temporary stay on the foreclosure proceedings while the Lebovits’ case was pending. In October of this year, the judge issued another stay on the foreclosure, but required Lebovits to pay a $1.5 million bond within seven days. Lebovits couldn’t come up with the money and the foreclosure resumed.
A UCC foreclosure sale is now set for Jan. 6. The sale is for the equity interests in the property; whoever acquires the interests is on the path to owning it. Typically in a UCC foreclosure, the lender submits a credit bid, or a bid using their existing debt, to acquire the interests.
Naturally there is another wrinkle. Lebovits has filed another lawsuit, naming both the lender and Unger, with similar allegations to his original complaint. The complaint seeks to stop the foreclosure a second time.
Aron Lebovits claims that he owned the Marcy Avenue properties, which included the site of his bakery business. Around January 2015, Lebovits’ son introduced him to Unger, who he had met while they both were living in Israel, according to the complaint. Unger allegedly told the elder Lebovits he had developed projects in Israel.
But Aron Lebovits alleges that after the two agreed to partner on the project, Unger provided fake documents to lenders to saddle it with debt, including $25 million in loans from DW Partners. Lebovits further alleges that Unger siphoned money out of the project and into another real estate development in Cincinnati.
Lebovits’ complaint further alleges that DW Partners knew Unger had no right to take on the loans without his approval.
Unger has previously dismissed Lebovits’ allegations, saying he already paid Lebovits millions of dollars and that Lebovits’ lawsuit has made it more difficult for him to refinance and avoid a foreclosure.
DW Partners’ attorneys also denied the allegations against the lender in a filing. The attorneys claimed the lawsuit is “an obvious and transparent attempt to circumvent this court’s prior ruling in a previously-filed action.”
Unger did not return a request for comment. DW Partners declined to comment. An attorney for Lebovits did not return a request for comment.
Matthew Mannion of Mannion Auctions is the auctioneer for the Jan. 6 sale.