Hello Living Developer Nostrand files bankruptcy amid lender feud

By Sarah Lizee

Olympia, Wash., Dec. 22 – Hello Living Developer Nostrand LLC filed Chapter 11 bankruptcy on Tuesday in the U.S. Bankruptcy Court for the Southern District of New York.

Eli Karp, managing director of the debtor, said the filing was made to stay foreclosure on a $3 million UCC mezzanine loan with Madison Realty Capital LLC.

On Dec. 19, 2017, Prophet Capital Asset Management entered into a commitment with Hello Nostrand for a $63 million construction loan secured by the real property and any improvements. On June 7, 2019, Prophet assigned the loan to Madison Realty.

Later, Madison Realty declared that Hello Nostrand had been in default, but Karp alleges the defaults were manufactured.

In August, Madison Realty repackaged the loan by granting an additional mezzanine loan of $3 million and recalculating the loan default rate. As a result, the total loan balance rose to $64.56 million from $56.19 million previously.

An action was commenced alleging causes of action against Madison Realty for fraud, breach of contract, breach of covenant of good faith and fair dealing. On Nov. 15, the New York State Supreme Court entered a decision and order granting the defendant’s motion to dismiss the complaint, partially on procedure and partially on substantive grounds.

The decision is presently on appeal, Karp said.

Karp said he believes that the debtor will be able propose a viable and confirmable plan of reorganization to deal with the mortgagee and its creditors whether or not the appeal results in a reversal of the decision of the New York State Supreme Court.

The company listed $50 million to $100 million in both assets and liabilities.

The apartment developer is based in Monsey, N.Y. The Chapter 11 case number is 21-22696.

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