Bank claims New Jersey investor lied to score loan at Fort Worth’s tallest tower

Lawsuit claims Opal Holdings founder lied to his bank to get a mortgage

Lawsuit claims Shaya Prager lied to get $83 million Burnett Plaza mortgage

Shaya Prager and the Burnett Plaza (Burnett Plaza Ft Worth)

May 24, 2024, 1:29 PM

UPDATED 5/29/24, 4:11 PM

After losing control of the tallest building in Fort Worth earlier this month, Opal Holdings may face more troubles in Cowtown.

Opal, a New Jersey-based investor founded by Shaya Prager, lost Burnett Plaza at 801 Cherry Street to its mezzanine lender, Pinnacle Bank. The deal appeared to work out to an eye-popping $12 per square foot, before considering the building’s $68 million senior loan, overseen by trustee UMB Bank.

But before the tower ended up at a foreclosure auction, Pinnacle accused Prager of lying about secretly owning the ground lease and the building to get an $83 million loan.

Prager did not respond to a request for comment.

The bank’s allegation comes from a March 2024 lawsuit filed by Tarrant Construction Services, claiming Prager owes the company more than $1 million in construction costs.

The lawsuit – in which Prager in turn blames Pinnacle – shows how Prager structured the deal.

In January 2021, Prager and his associates established three LLCs: Burnett Plaza Holdings, Burnett Cherry Street and Burnett Cherry Street Member.

Burnett Plaza Holdings purchased the tower for $137.5 million in April 2021. Around the same time, it signed a ground lease with Burnett Cherry Street, public records show.

The two companies ostensibly operated as separate enterprises. Burnett Plaza Holdings collected ground-lease rent from Burnett Cherry Street, which operated the building, collecting rents and providing maintenance, security and other services.

But they may not be so separate.

In the sale documents filed with Tarrant County, Burnett Plaza Holdings’ address is the same as Burnett Cherry Street’s: 950 Airport Road in Lakewood. Some investors whose names do not appear on Opal Holdings’ website have signed for Burnett Plaza Holdings, including Avrohom Prager, Shimon Katz and Lawrence Heller. But in the sale document, it says all correspondence for the entity should go to Shaya Prager in Lakewood.

Under this muddled ownership structure, Prager borrowed as both a landlord and a tenant, the lawsuit claims.

Burnett Plaza Holdings borrowed $86 million against the property. On that senior loan, the trustee on the deed of trust was Riverside Title. Earlier this year, Fannie Mae told lenders it would not accept mortgage loans closed using Riverside. Fannie Mae said it instituted the change because Riverside and another title company had participated in closings by Brooklyn real estate investor Boruch Drillman that the Department of Justice later determined to be fraudulent.

Fannie and Freddie have responded with broader investigations into mortgage fraud now that they suspect some of the loans they purchased are fraudulent.

Burnett Cherry Street, the ground lease tenant entity, also borrowed $83 million from Pinnacle Bank against the lease.

In total, both entities associated with Prager took out $169 million in loans on the building, which it purchased for $137.5 million.

Typically, the loan-to-value ratio for a building is between 60 and 70 percent. In this case, one $80 million loan would be standard, not two.

“Of course, nothing could go wrong with this Real Estate Strategy,” a seemingly sarcastic contention in the lawsuit read.

In response to Tarrant Construction Services’ original filing, Prager blamed Pinnacle Bank, claiming the lender took actions “to manufacture” defaults and, in turn, gain control of Burnett Cherry Street.

But Pinnacle’s response upped the ante and accused Prager of bank fraud.

In its filing, Pinnacle claims Prager told the lender that Burnett Cherry and Burnett Plaza Holdings were not affiliated “to induce Pinnacle into the Loan Agreement.” The loan agreement stipulates that false or misleading statements made by the borrower in connection with the loan documents constitutes a default.

A trial is set for February 2025.

Pinnacle acquired the building in a May 7 foreclosure auction with a $12.3 million credit bid against the $13 million loan it extended to Burnett Cherry Street. In taking over the building, Pinnacle also absorbed the building’s $68 million senior loan.

Burnett Plaza isn’t the only building Opal lost to Pinnacle Bank this year.

In April, Pinnacle foreclosed on a 450,000-square-foot office park Opal owned in Arlington. Opal defaulted on a $40 million loan at that property, located at 600, 616 and 624 Six Flags Drive and 2401 East Randol Mills Road. The complex was most recently appraised at $43 million.
Pinnacle took over the office park with a $30 million credit bid at a May 7 foreclosure auction, the Dallas Business Journal reported.

UPDATE: After publication, a spokesperson for UMB Bank said it is the trustee for a credit tenant lease financing on the property, not the senior lender.