Real-Estate

EB-Funds Sue to Stop HFZ Tower Project Foreclosure Sale

Suit alleges investor Kamran Hakim, at left, planned to inject $40 million to help save 29th and Fifth tower project. At right, HFZ’s Ziel Feldman. (Getty, HFZ)

Entities acting on behalf of EB-5 funds are trying to stop a foreclosure sale that would wipe away $60 million investors plowed into a failed Manhattan tower project that HFZ Capital was to develop with a church.

The three affiliates of EB-5 regional center U.S. Immigration Fund are suing the tower project’s mezzanine lender, Vanbarton Group. The lender provided HFZ with a $91 million loan to help finance the project. The lawsuit contends Vanbarton cannot foreclose on the West 29th Street property because it wrongfully obtained an interest in the property. 

The foreclosure sale is set for Friday; in addition to erasing the EB-5 investor money, it would wipe out HFZ and the church’s stake in the project.

HFZ, which has been beset by financial troubles, had entered into a joint venture with Marble Collegiate Church to build a 34-story office tower designed by Bjarke Ingels on church property. HFZ enlisted a portion of funding through the EB-5 visa program. The investment was structured not as a loan but as a riskier preferred equity. In addition to defaulting on the Vanbarton debt, HFZ has also faced liens and lawsuits from subcontractors on the project.

The entities that filed suit in New York Supreme Court on Friday also allege Vanbarton is trying to commence the sale without approvals from the state attorney general as required by law.

Vanbarton threatened legal action against an affiliate of the church, according to the filing, and possibly individual ministers, deacons and elders, if the church raised these concerns about the sale.

Vanbarton did not immediately return a request for comment. Ziel Feldman-led HFZ and its attorney did not provide a comment. A lawyer for the entities that filed suit did not comment. Marble Collegiate did not return a call for comment. 

The entities suing say the property and their stake could still be saved. They contend a joint venture between HFZ and New York real estate mogul Kamran Hakim planned to inject $40 million into the project. That would cure the defaults and would fund 18 months of interest payments owed to Vanbarton, according to the suit. Hakim could not be reached for comment.

The 400-year old Marble Collegiate Church contributed about $112 million in properties toward the joint venture with HFZ, according to the lawsuit. In exchange, the church — which runs a real estate arm called Collegiate Asset Management Corp. — would have received nearly $27 million in cash. It would also get 50 percent of the equity and a commitment that the HFZ-managed venture would build a fellowship hall and community facility.

Israeli billionaire and diamond mogul Beny Steinmetz reportedly also has a loan on the project. In January, he was sentenced to 5 years in a Swiss prison for paying bribes to a public official in the West African country of Guinea in order to secure rights to an iron ore mine.

The U.S. Immigration Fund, led by Nicholas Mastroianni, has been a prominent fundraiser for the EB-5 program, connecting foreign citizens with development projects. USIF has been the subject of several EB-5 investors. USIF has denied allegations of wrongdoing. 

Rich Bockmann contributed reporting 

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