EB-5 investors are suing Vanbarton Group, Protestants
Real estate investors take note: Don’t bet against God. Or at least not against religious institutions protected by New York Religious Corporations Act.
For those who lost more than $ 60 million in the past year, that lesson may have come too late when the bankruptcy of HFZ Capital’s 29th Street and Fifth Avenue office building hit.
A group of foreign investors last week sued the Vanbarton Group, which took control of the project as a mezzanine lender through a foreclosure auction in April. The group also sued a company that controls assets of the Reformed Protestant Dutch Church in New York, which had substantial land and air rights in the development alongside Marble Collegiate Church.
The foreigners who sought green cards for the investment through the controversial EB-5 program wonder why none of the 90 prospective buyers who participated in the auction made a bid – despite the prominent location of the project. The lawsuit alleges that Vanbarton and the Church reached a backroom agreement so that the Church would not revoke the land and air rights transfer to the site, in a vicious attempt to resolve the bankruptcy because other investors were ousted.
Vanbarton and the Church “sabotaged the process and acted to knowingly or intentionally deter potential bidders from submitting bids,” the lawsuit said.
After the auction was not stopped at the last minute, investors are now referring to the so-called data room of the auction, in which prospective buyers carry out due diligence, as the source of the financial damage. Vanbarton submitted the application in the room, which is little more than a digital folder accessible to bidders a letter by church advocates saying that if the church loses the property and air rights it brought in, like at an auction, it can ask a court to cancel those promotions, effectively ending the project.
The Church estimated her contribution to be $ 112 million, for which she received $ 26.75 million in cash and a 50 percent stake in the project. Vanbarton now owns this stake.
Given the loss of its project capital as well as the land and air rights it contributed, the Church said it could use New York Religious Corporations Act to protect its assets as an integral part of its nonprofit mission. Under that law, the New York attorney general has the power to protect religious institutions from being fleeced by less benevolent dealmakers.
A lawyer representing Vanbarton confirmed that the church’s letter had been placed in the data room and said the company considered it “essential” to the auction. An attorney for the EB-5 investors declined to comment. The church did not respond to a request for comment.
The HFZ has faced a number of lawsuits over money it owes lenders, contractors and investors since it became financially insolvent during the pandemic. Construction on the Marble Collegiate Church site stalled after digging a foundation next door.
HFZ valued the property on the project at $ 350 million and said the revenue from an office building there would be more than $ 1 billion. Vanbarton received the property for $ 85 million – the amount of his outstanding mezzanine loan – and took on a senior loan of $ 126 million previously made by Otera Capital.