Lender sues HFZ, Monroe over XI lifeline 

Ziel Feldman secured a lifeline from his lender Monroe Capital in late 2020, just as his development firm was on the verge of collapse.

The deal was costly. Feldman’s HFZ Capital Group, which was in default on $113 million in loans to Monroe, would hand over two of its most prized, albeit unfinished, projects: The XI, a twisting ultra-luxury condo development on the High Line, and the Shore Club Residences in Miami Beach.

In exchange, HFZ had a chance to make money once its debts to Monroe had been paid off.

Its Monroe loans were secured by a number of properties, including a penthouse where Feldman and his wife Helene lived. The couple also personally guaranteed the loan.

But more than two years after the deal with Monroe, another HFZ creditor is crying foul.

An entity tied to Israeli auto magnate Yoav Harlap is alleging the deal was fraudulent and was part of a scheme to shield HFZ and Feldman’s assets from creditors. Harlap’s attorney claims to have only recently found out about the agreement through discovery.

The lawsuit is the latest chapter in Harlap’s multi-year quest to collect on a $20 million loan that his YH Lex Estates provided to an HFZ project on the Upper East Side that was never built.

In early 2021, a judge ruled that YH Lex could go after Feldman’s former partner Nir Meir, whom Feldman blames for the firm’s collapse. A year later, an appellate court ruled YH could collect from Feldman as well.

But Harlap has had little luck collecting.

YH has aggressively pursued Meir, alleging the former HFZ executive and his wife were essentially playing “catch me if you can” by flocking to Miami Beach and splurging on fine wines, stays at the Four Seasons and over $1.5 million in gold. As part of the litigation, Meir was recently held in contempt of court for transferring money out of a restricted account.

But YH is now looking at deals Feldman cut with Monroe. The lender alleges HFZ transferred assets to Monroe for far less than they were worth, which left HFZ insolvent. YH alleged in the suit that the deals benefited the Feldmans, who continued to live in the $30 million penthouse because Monroe failed to take possession of it.

An attorney for HFZ, Y. David Scharf of Morrison Cohen, called YH’s allegations “scurrilous, irresponsible, false, frivolous and incapable of being supported by the facts.”

YH is trying to move ahead of the other HFZ creditors and investors who are part of a creditor’s trust, Scharf said.

Monroe also denies the allegations by YH and claims it has invested tens of millions of dollars to cure defaults and stabilize the assets.

“YH is a junior, unsecured creditor making an apparent attempt to jump to the front of the line ahead of other unsecured creditors,” said a spokesperson for Monroe Capital.

By YH’s account, Feldman and Helene could secretly retain certain assets, and they and HFZ will also get back-end payments when HFZ’s properties sell and Monroe’s debts have been paid, according to the lawsuit.

The lawsuit also draws attention to a second deal struck by HFZ and Monroe, in late 2021. YH alleges the deal gave Monroe control of the XI through “deed-in-a-box” foreclosure strategy. It also alleges HFZ set up sham entities to move assets beyond YH’s reach.

Monroe denied the allegations. In a court filing, it claims it purchased the defaulted senior and mezzanine debt on the XI project for about $900 million. It was the successful bidder at an auction and partnered with Witkoff and Len Blavatnik’s Access Industries to take control of the Chelsea project. 

Monroe said the notion that the Feldmans are living for free in the penthouse and diverting assets is false. The lender is planning to force a sale of the penthouse, which will pay off its $20 million mortgage, and said any money paid to HFZ will be used to benefit its creditors, including YH.

YH’s attorney declined to comment on the litigation.

HFZ was once one of New York’s most active condo developers. It owned the Astor, the Belnord, the Chatsworth on the Upper West Side and the XI in Chelsea. Feldman has blamed Meir for the company’s collapse. Meir has said he’s not to blame.

Read more

New York

Ziel Feldman calls Nir Meir a ‘sociopath,’ compares XI lender to mobsters

New York

HFZ set to lose stake in $2B XI condo project

New York

Judge rules against Nir Meir in HFZ’s $19M default case