Webster Bank Sues Shaya Prager for $153M Office Loan Default

UPDATED 10/15/24 2:00pm

A new kettle of vultures is circling above New Jersey investor Shaya Prager and his crumbling office empire.

Prager’s latest jilted lender, Connecticut-based Webster Bank, claims he defaulted on $153 million in loans.

The bank named the Opal Holdings founder and his wife Shulamit Prager in two lawsuits filed this month in the Superior Court of New Jersey. One claims the pair defaulted on a $62 million loan backed by ground leases at American Metro Center, a 488,000-square-foot office complex in Hamilton, New Jersey, purchased by Opal in 2019.

The second, filed a day later, claims the pair defaulted on a $91 million loan backed by ground leases at 300-600 Campus Drive in Florham Park, New Jersey. The property is a four-building office complex that totals 582,000 square feet. Opal bought it in 2020.

Between the two loans, Webster claims, Prager owes $141 million. He did not comment on either suit.

The lawsuits hint at the ground lease structure for which Prager is known.

In the case of these properties and his other assets around the country, Prager appears to purchase the land and buildings on it, then lease the buildings on to an entity also affiliated with Opal.

The land owner and the ground lease tenant, both tied to Prager, then take out loans against the land and the ground lease, respectively. The mortgages amount to more than Prager initially paid for the entire property.

Lenders aren’t typically on board with this scheme because it means “the borrower has no skin in the game,” said David Eyzenberg, a ground lease expert on the faculty at NYU and the University of Miami.

This arrangement got Prager into trouble in Texas when his lender claims he lied about the connection between the landlord and ground lease tenant of Burnett Plaza, a 40-story office building in Fort Worth. He denies this.

“This transaction structure has been used more than two dozen times by entities owned by Mr. Prager, and yet Pinnacle is the only party involved in one of those transactions that claims it was not aware of the potential common beneficial ownership between the landlord and tenant,” a spokesperson for Prager said.

The lender, Pinnacle Bank, claimed in a lawsuit that Prager’s actions were tantamount to mortgage fraud. A trial is scheduled for July.

Prager is also facing foreclosure on two Minneapolis office towers and a four-building office complex in the Chicago suburbs.

He’s on track to face sanctions in the lawsuit regarding the Chicago property for failing to comply with the judge’s orders to turn over $2 million to the property’s receiver.

Finally, his preferred equity investors on three other properties are suing him, arguing he owes them $10 million in preferred returns. In that case, Prager is accusing the investors’ managing member of embezzling the $10 million.

This story was updated to include a statement from Shaya Prager.