Eli Karp’s troubled Flatbush development site has gone back to the lender in a credit bid.
Madison Realty Capital took over the property at 1580 Nostrand Avenue with a $70 million credit offer, according to property records. Karp once planned a sprawling two-building development called Hello Nostrand on the site.
But Karp completed only one of the buildings: a 93-unit rental building at 21 East 29th Street. It was auctioned in June, along with the undeveloped property on Nostrand Avenue, according to a deed filed with the city.
The building had been embroiled in lawsuits for years. Karp’s Hello Living purchased the site in 2014 for $13 million with plans to build a luxury apartment complex. But as soon as construction started, he ran into problems with lenders.
Karp declared bankruptcy on the property in 2021, a day before senior lender Madison Realty Capital could initiate a UCC foreclosure process. Madison then sold the $6 million mezzanine loan and the $73 million senior loan on the property to another firm, Arch Companies, which then sued Karp to initiate another foreclosure on the property.
In that lawsuit, Arch alleged that the project’s ownership entity improperly entered into a master lease with a tenant, which would delay rent payments for months and could exclude the property from the 421a tax benefit.
Then Arch himself got into trouble and Karp agreed to the bankruptcy sale. Madison later took back the senior loan.
Karp was once a promising developer who gambled on building luxury rental apartments in Brooklyn’s less sophisticated neighborhoods. All his projects had ‘Hello’ in their name and were notable for their sleek designs, which looked out of character next to neighboring buildings.
Another Karp property at 2417 Albemarle Road was auctioned last year and went to the lender via a credit bid.
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