Partners sue Eddie Shapiro over secret deal with lenders

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Nest Seekers founder Eddie Shapiro is being sued for allegedly making a back-room deal with lenders to get him out of millions in borrowed money used to build a Queens condo.

A complaint brought by his partner Raphy Benaim alleges Shapiro “orchestrated a deceitful and unlawful scheme” to obtain an “unfair windfall” on the project they were partnered on at 112 Northern Boulevard known as the Sage House Condominiums.

EDDIE SHAPIRO

According to court papers, Shapiro was part of a group of
investors that in 2007 partnered to turn a gas station owned by Benaim at 112
Northern Boulevard into a luxury condo. The 33-unit property included a gym,
roof deck, zen garden and “gorgeous views” from its location on the border
between Corona and Flushing as well as a ground floor parking garage.

The group borrowed $11.7 million from People’s United Bank
to build The Sage House, but when they ran into trouble with repayments, the
bank moved to foreclose.

According to the complaint, the foreclosure was put on hold
when the bank sold the loans to S2, an arm of the Torchlight Investment
Management portfolio, and a deal struck to repay them the money through the
sale of the individual units.

The Benaim group claims it sold 27 apartments and handed the
lender $13 million to pay off the loan.

But S2 and Torchlight are now moving to foreclose again,
claiming they’ve only been paid $4.7 million.

According to the attorney for Benaim, Marc Lavaia of Warshaw
Burstein LLP, the lender has been unable to provide the Benaim group with a
sufficient accounting of all payments it received from apartment sales as well
as rents it got from unsold units and revenue from the property’s ground floor
parking garage.

The complaint alleges that Shapiro made a “secret deal” with the lender to waive his personal guarantee on the original loan, a move that wasn’t just a breach of the investor operating agreement, but fraud.

Benaim is arguing that the lender shouldn’t be allowed to foreclose on the property and, to date, the court has stayed the foreclosure. Said Lavaia, “Although our focus at the moment is to stave off a foreclosure on the project, claims against Shapiro will be addressed at some point in the near future.”

The complaint names S2 Corona, Torchlight Debt Opportunity
Fund, Lev Development Group, Lev Asset Management and Shapiro as defendants in
the case seeking a full accounting of how their payments were applied against
the original $11.7 million loan balance plus damages to be determined at trial.

Attorneys for Shapiro and S2 did not respond to a request
for comment.

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