Brooklyn church conversion puts second developer into purgatory

The owner of a boarded-up church in Clinton Hill has put the property into bankruptcy, five years after acquiring it for an ambitious conversion project.

Brooklyn developer Serabjit Singh Malhotra filed bankruptcy papers last week for 257 Washington Avenue, formerly St. Luke’s Evangelical Lutheran Church, four months after the property went into foreclosure. The property had been scheduled to be auctioned on May 23, though the date was later postponed to June.

Singh is the second developer to own the property and to attempt to convert it into housing in the 10 years since the church was shuttered. He purchased it from Brookland Capital for $13.5 million in 2019, when Brookland was facing financial difficulties and unloading properties. The building is landmarked, according to records from the Department of Building, adding to the challenge of such a conversion.

In a filing related to the foreclosure, Singh’s lawyer Gregg Star contended that the developer could not repay the loan because the pandemic paused construction and prevented Singh from collecting rent on his other properties. Star had no comment when reached by phone last week.

Valley National Bank granted Singh three loans totaling $15.1 million in 2019, foreclosure filings show. The loans, which were secured with a limited guaranty and a recourse carve out guaranty, were due in June 2022 but went partially unpaid. In August 2022, Valley Bank began foreclosure proceedings.

Valley’s foreclosure motion claims that Singh allowed the property’s hazard insurance to lapse in May 2021 and that he failed to pay property taxes for 2020 to 2022. The bank also cited an action against Singh brought by A10 Capital in 2021. (In 2019, A10 lent him $23.9 million secured by a low-scale office building at 157-163 13th Street and 521 and 529 Third Avenue in Brooklyn, and sued to be repaid $29 million. That case is apparently no longer active.)

According to a court filing from Star, at least three additional Brooklyn properties controlled by Singh are or have been in foreclosure with Idaho-based Valley: 461 Sixth Avenue, 232 Adelphi Street and 25 Lexington Avenue.

The property at 25 Lexington was sold and the two sides have reached an agreement in principle for 232 Adelphi, another church that was converted into housing.

According to Star’s court filing, Singh had begun converting the property at 257 Washington Avenue into residential units, but progress was stopped at the outbreak of the pandemic when the state halted non-essential work.

A search of Department of Buildings records shows four permit applications have been filed since the church was shuttered in 2014. Only one was granted, allowing for largely interior work, with no changes in use, egress, or occupancy.

The remaining plans were disapproved in 2022. These included requests to convert a school building on the lot into a seven-family dwelling, to conduct structural foundational work, and to install mechanical equipment and piping.