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From Crains Business

 

From Crains Business

  

Two Boymelgreen firms threatened with bankruptcy

 

Problems mount for troubled developer Shaya Boymelgreen, who is alleged to be

$200,000 behind in his rent at his Brooklyn headquarters, 752 Pacific St.A company claiming to be a tenant in Shaya Boymelgreen's American headquarters in Brooklyn filed to push two companies controlled by the embattled developer into Chapter 7 bankruptcy last week. The tenant's legal move was made to avoid being evicted along with Mr. Boymelgreen, whose firm was slated to be removed from 752 Pacific Ave. Tuesday.

The order for that eviction, in turn, came after Mr. Boymelgreen lost a legal battle with the landlord of the building, which stands within the footprint of the huge Atlantic Yards development. The landlord, Henry Weinstein, says Mr. Boymelgreen is about $200,000 behind in his rent but that he has no knowledge or record of the developer leasing space to subtenant.

 

Mr. Boymelgreen's tenant, 752 Pacific St. Corp., didn't want to be ousted so it filed the petition to stop the eviction process and open a dialogue with Mr. Weinstein. The two companies named in the suit once controlled the leases to 752 Pacific Ave. and a neighboring parking lot but lost them in a lawsuit with Mr. Weinstein. They don't include any of Mr. Boymelgreen's real estate holdings, according to Joseph Dejani, a paralegal representing 752 Pacific St. Corp., a company that subleases space from Mr. Boymelgreen.

 

Mr. Dejani says that Mr. Boymelgreen's firm promised to pay his client $252,000 if the lease was broken early but said it couldn't fulfill its pledge. Calls to Mr. Boymelgreen's company weren't immediately returned.

 Mr. Dejani said that his client has been renting about half the building from Mr. Boymelgreen since 2005. He added that it has been paying its rent of $6,000 a month consistently to Mr. Boymelgreen's companies and would like to remain in the building.

“Boymelgreen never gave us any indication of subtenants,” Mr. Weinstein said. “We just assume this is some kind of fraud.”

 

Mr. Weinstein added that he is talking with authorities about moving ahead with the eviction.

 

On Oct. 8, the Brooklyn Sheriff's office slapped a five-day eviction notice on the building, which Mr. Boymelgreen began leasing in 1999.

 

Mr. Weinstein said he sued Mr. Boymelgreen in 2006 after learning the developer sold his 40-year lease on the building to Forest City Ratner without Mr. Weinstein's knowledge. Forest City needs to raze the building so it can construct its project on the rail yards, which is slated to include an arena and 16 residential towers.

 

In May, the New York state Court of Appeals ruled that Mr. Weinstein could evict Mr. Boymelgreen and that Forest City was given illegal assignment to Mr. Weinstein's properties. Mr. Weinstein said Mr. Boymelgreen hasn't paid rent since June.

 

“Boymelgreen went behind my back and sold my lease,” Mr. Weinstein told Crain's last week. He has owned the buildings since 1985 and says he doesn't want to sell the property to Forest City but he may have no choice.

 

Last week, New York's top court heard a case that will determine whether the Empire State Development Corp. can seize property through eminent domain for Forest City's project.

 

The filing and pending eviction are just the latest in a series of troubles plaguing the developer.

 

For example, in August the Federal Deposit Insurance Corp. issued an order demanding that LibertyPointe, a bank Mr. Boymelgreen co-founded four years ago, cease and desist its risky lending policies.

 

Mr. Boymelgreen remains the bank's chairman even though he isn't involved in daily operations. The bank is under fire from the FDIC for numerous infractions, including operating with too many bad loans and inadequate loan loss reserves. The FDIC also says the board of directors failed to supervise policy sufficiently.

 

Additionally, Mr. Boymelgreen is saddled with stalled projects, including a planned residential tower in Chelsea. Meanwhile, he is facing a tide of lawsuits alleging everything from failure to repay loans to fraud and negligence, as well as breach of contract related to the construction and sale of two condominium projects.

 

The two companies named in the filing are 752 Pacific LLC and Pacific Street Park Corp.

 

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