Eli Karp’s Hello Living lost two Brooklyn properties this week after years of battling lenders. The firm is handing over its equity stake in Hello Flatbush and unloading another in a bankruptcy sale.
From the surface, the story looks similar to so many we’ve heard this year. Distress has spread across sectors as interest rates have climbed, and landlords are surrendering buildings to lenders.
But most of those surrendered buildings are offices that fell into trouble during the pandemic. Karp’s problematic projects are high-end apartments. They’ve been struggling since at least 2019 — before Covid.
Hello Living once had a compelling sales pitch: The firm would bring luxury residential properties deep into Brooklyn.
But complications with lenders arose shortly after construction began. In 2019, Hello Living defaulted on loans tied to several properties, including Hello Nostrand. Karp singled out Madison Realty Capital, alleging in a lawsuit that the company deliberately created loan defaults to increase interest rates to a staggering 24 percent.
During this legal dispute, a website called MadisonPirates.com appeared, portraying Josh Zegen, a key figure at Madison Realty, as a cartoon villain. Karp never confirmed his involvement with the website, but his legal complaint was soon dismissed.
Hello Living lost its equity interest in Hello Nostrand to its mezzanine lender, Jeff Simpson’s Arch Companies, at a UCC foreclosure auction last year.
Now Karp’s firm is losing two more properties to a different mezzanine lender, iCross Capital. The lender made up to $9.5 million in loans on three properties in 2018 and 2019. Since then it’s attempted to foreclose on all three.
The matter appears to have been resolved, and it was a bit less messy this time. A settlement was reached last month between Karp and iCross, signaling a significant concession by Karp.
As part of the agreement, he will relinquish his equity stake in one project — Hello Flatbush — and sell another — Hello Albemarle — through a bankruptcy procedure. iCross will drop its foreclosure suit at the third property, Hello Lenox, where Karp is still facing foreclosure from the building’s senior lender.
What we’re thinking about: Bids for Signature Bank’s real estate loans were due yesterday. The impending sales are expected to have a huge impact on valuations of commercial and residential properties throughout the city. WSJ forecasted a drop of 15 to 40 percent. What do you expect from the auction? Send a note to firstname.lastname@example.org.
Deeds and permits weren’t filed Friday because city offices were closed for Veterans Day.
New to the Market
The priciest residence to hit the market Friday was a co-op at 79 East 79th Street on the Upper East Side asking $11.75 million. Corcoran Group has the listing.
A thing we’ve learned: We’re still two years away from the next mayoral election, but political spectators are already weighing the odds of potential challengers. The City put together a guide on those most likely to take on Mayor Adams.
Elsewhere in New York
— Speaking of the mayor, Adams’ phone and iPad were seized by the FBI, the New York Times reported. The action may be part of an investigation of donations to Adams’ 2021 campaign.
— Upstate leaders, including from Oneida, Broome and Rockland counties, are stopping low-income NYC residents from using city-funded housing vouchers to rent in their areas, Gothamist reports. The move follows a city policy change allowing the use of CityFHEPS vouchers outside the five boroughs.
— In another potential blow to office owners, unionized commercial maintenance workers are considering going on strike. The workers are part of 32BJ SEIU. According to Brooklyn Paper, hundreds of office cleaners took to the streets Thursday after employers signaled the possibility of cutting benefits. The workers pay zero percent of their health insurance premiums.