The Real Deal
Developer of troubled condo conversion in Harlem is now fighting its lender
October 2, 2018
Patrick Mulholland
Developer of troubled condo conversion in Harlem is now fighting its lender
Madison Advisory Group claims its lender never informed the firm it was in default A troubled condominium conversion in South Harlem has been hit with over $1 million in default penalties on a construction loan. But the project’s developer says it was never informed it was in delinquency.
A troubled condominium conversion in South Harlem has been hit with over $1 million in default penalties on a construction loan. But the project’s developer says it was never informed it was in delinquency.
Madison Advisory Group, the owner of 320 West 115th Street, filed a complaint in New York State Supreme Court on Monday, alleging it was “wrongfully charged” by lender Avant Capital Partners. Madison is looking to recover those default fees.
The group borrowed $4.65 million from Avant in late 2014 to convert two townhouses into a six-unit condo building. By April 2016, however, the developer said it had run into difficulties with its construction manager, All Building Construction Corp. In a separate suit filed in April, Madison alleges that ABCC cost them nearly $5 million in damages through shoddy work, repeated attempts to extort the developers and a series of delays, which ran to 10 months.
Alex Getelman, a senior executive at ABCC, previously served time in prison for inflating construction bills through his company Aragon, ultimately stealing $1.2 million from Citadel Investment Group. He was convicted on fraud and larceny charges.
Madison’s $4.96 million claim against ABCC is still ongoing.
In light of these setbacks, Madison said in its complaint that Avant agreed to push the loan maturity date back by a total of six months. During that period through to the new expiration date — Nov. 30, 2016 — Madison claims that they held “regular discussions” with Avant as to the status of the project, but no mention was ever made of any default.
The loan was not repaid at that point, court documents state, but the lender’s attorney “assured” that no notice of default would be sent.
As Madison neared the sale of five condo units at the development, it requested loan payoff information from Avant, which the lender sent on Oct. 23, 2017. According to court documents, the developer was shocked to find that there was a $1.04 million penalty for 803 days of default interest. Furthermore, in the absence of payment, Avant refused permission for Madison to close on the sale of five units in the building.
“Our clients were handcuffed,” said Richard Roth, the lawyer who drafted the complaint. “They were essentially forced to pay a penalty on a loan, which they didn’t know existed, otherwise they couldn’t go forward with these transactions.”
In a letter dated Dec. 12, 2017, Roth informed Avant that, in addition to accruing further interest on the loan, avoiding further delay on the sale of the condos was the sole reason for Madison’s payment of the penalties. The letter also stated that it would preserve the “borrower’s rights to pursue its dispute against [Avant]” regarding the default penalties.
When reached for comment, Adam Luysterborghs, managing director at Avant, said the firm does not comment on pending litigation, but had not been served with any pleadings.
