Hello Living developer Nostrand lender blasts ‘unconfirmable’ plan

By Sarah Lizee

Olympia, Wash., May 13 – Hello Living Developer Nostrand LLC’s disclosure statement for its Chapter 11 plan drew another objection, this time from lender Nostrand Mezz Lender LLC, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, Region 2 U.S. trustee William K. Harrington objected to the disclosure statement on Wednesday, citing its lack of information for creditors.

The lender agreed that there isn’t enough information in the disclosure statement and added that it contains “misleading, inaccurate and/or biased” statements about non-debtor Hello Nostrand, LLC’s pre-bankruptcy relationship with Madison Realty.

Hello Nostrand is a wholly owned subsidiary of the debtor, which owns a parcel of real property in Brooklyn, N.Y., whose equity interests are the debtor’s sole asset and pledged to Nostrand Mezz Lender.

The lender also said the disclosure statement also leaves out important facts concerning the debtor’s ability to make distributions to creditors, including how the debtor is planning to use proceeds from Hello Nostrand’s lease with 1580 Nostrand Management, LLC, which are assigned to Hello Nostrand’s mortgage lender, and when the property is currently at risk of being foreclosed on by the mortgage lender.

The lender added that the plan improperly shields the debtor’s principal, Eli Karp, for no consideration and seeks to reward him by allowing him to keep his stake in the property and his management position, “despite years of him not being able to complete development” of the property.

“Yet, the disclosure statement contains absolutely no details regarding the plan’s releases of Mr. Karp, who personally guaranteed the mezz lender’s loan,” the lender said in its objection.

The lender said the debtor’s estate received no value from insiders and added that the debtor isn’t an “operating” entity, with no employees, no business and no revenue.

“Mr. Karp put the debtor into bankruptcy after a New York State Court repeatedly denied staying a foreclosure sale of the ownership interests,” the lender said.

The lender also said the plan itself isn’t confirmable because it doesn’t have the support of the lender, which is its key stakeholder.

“The plan provides mezz lender with a payment stream from non-debtor Hello Nostrand on terms that are undisputedly below market, shifting the real risk of the debtor’s default under the plan to the mezz lender,” the lender said.

The lender also said the plan isn’t feasible because the proposed payment stream impermissibly diverts the mortgage lender’s collateral.

“Moreover, the plan is premised on the mortgage lender not foreclosing on the property during the five-to-nine years it will take the debtor to pay creditors in full – an incredibly unlikely scenario,” the lender said.

“Clearly, the debtor is not able to, nor was ever able to, propose a confirmable plan.”

The apartment developer is based in Monsey, N.Y. The company filed Chapter 11 bankruptcy on Dec. 21 under case number 21-22696.

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