From left: Hutton Capital’s Ron Friedman, BridgeCity’s Allan Lebovits, Toby Moskovits, and Heritage Partners’ Michael Lichtenstein along with 225-227 Grand Street in Brooklyn (Getty, Google Maps, Hutton Capital, BridgeCity, Heritage Partners)
The apartment and retail building at 225-227 Grand Street in Williamsburg cemented Toby Moskovits’ rise as a Brooklyn developer. Now it could represent her fall.
The 41-unit property has been sold at a bankruptcy auction to the sole bidder: its mezzanine lender, an entity that includes Hutton Capital’s Ron Friedman, Rosewood Realty’s Aaron Jungreis and BridgeCity Capital’s Allan Lebovits.
It’s the latest sign of trouble for Moskovits and business partner Michael Lichtenstein, who lost control of the nearby Williamsburg Hotel to a trustee in June as part of a separate bankruptcy.
The saga of 227 Grand Street involves some of the biggest players in Brooklyn real estate.
A decade ago, Moskovits’ firm tapped prolific architect Karl Fisher to design the building, whose oversized black windows, red brick facade and expansive rooftop symbolized Williamsburg’s cool industrial aesthetic at a time when the neighborhood was still evolving into a haven for well-to-do millennials.
In 2011, Moskovits turned to up and coming Brooklyn landlord Yoel Goldman to invest in the project, which was then under construction. Goldman paid $2.5 million in exchange for a 35.25 percent stake. The rest would be split between Moskovits, who would hold 5 percent; Lichtenstein, who held a 26.75 percent stake; and real estate investor Moshe Schweid, who had the remaining third.
But the relationship between Goldman and Moskovits would soon implode.
After a series of lawsuits, Goldman and Moskovits agreed in 2015 to part ways and divest from a handful of properties they had jointly owned, but Goldman kept his stake in the Grand Street building and his company, All Year Management, continued to manage it.
The agreement did little to solve their problems.
A year later, the partners were back in court when Goldman’s development company, All Year Holdings, sued Moskovits and Lichtenstein, claiming they were attempting to oust him from the project. Meanwhile, Moskovits, Lichtenstein and Schweid then sued Goldman in 2017, accusing him of stealing company funds.
By 2019, the senior loan was coming due and the mezzanine lender filed to foreclose on the equity stake in the property.
Moskovits and Lichtenstein responded with a familiar tactic among Brooklyn landlords seeking to stave off a foreclosure: They hired bankruptcy specialist David Goldwasser to get the case in front of Robert Drain, a since-retired federal bankruptcy judge in White Plains, New York, with a reputation of being friendly to debtors (something Drain has steadfastly denied).
At the time of the filing, Lichtenstein told TRD, the bankruptcy application would be withdrawn shortly. It was not.
The bankruptcy proceedings lasted three more years. During that time, Goldman sued Lichtenstein and Schweid once more in 2020 for attempting to squeeze him out of the property. Lichtenstein and Schweid fired back, claiming that Goldman was colluding with others to force the senior mortgage, which had been purchased by Madison Realty Capital, into default.
By late 2021, it appeared Goldman’s All Year Holdings had once again reached a compromise with Moskovits and Lichtenstein. All Year would hand over its stake in the property for $4.5 million. The hotel would be refinanced and exit bankruptcy.
But the deal fell apart. All Year later claimed Moskovits and Lichtenstein’s company never made its required payments.
Eventually, the mezzanine lender grew tired of the lack of progress in the bankruptcy case. In April, it filed to convert the case to a Chapter 7 bankruptcy, whereby a court-appointed trustee would liquidate the property. The mezzanine lender argued the debtors failed to file timely operating reports and would not be able to pay back their creditors, which included another mezzanine lender also tied to Hutton Capital’s Ron Friedman.
Settlement negotiations carried on through the spring, but there was a major sticking point: All Year Holdings had not signed an updated settlement agreement. This proved to be a difficult task. Goldman, who has faced his own string of defaults, was forced out of All Year and replaced by restructuring officers, who put the company into bankruptcy in the U.S. and British Virgin Islands.
During a June 8 hearing, Judge Drain questioned the need for All Year to sign the agreement since it already signed a previous agreement.
“It doesn’t make sense. There’s already an agreement. It could just as easily say, you know, I want Pete Alonso to sign it,” Drain said, referring to the New York Mets’ first baseman.
At the hearing, the debtors said New York distress lender SME Capital would provide them with exit financing. But fast forward three weeks, to just days before Drain would retire from the bench, and SME was out.
“Unfortunately, as a result of the recent credit market contractions, we discovered on Friday that our exit finance lender had lost its financing,” the debtor’s attorney said in a hearing.
With no financing, the property headed to the auction block late last month. The mezzanine lender was the lone bidder, putting down $41.5 million, using existing debt and new cash.
To finance the cash part, the Hutton Capital-led group secured a $27 million loan from Teaneck, New Jersey-based Cross River Bank. The loan document was signed by Rosewood Reatly’s Aaron Jungreis and Brooklyn investor Allan Lebovits in addition to Friedman, according to court filings.
The money will be used to pay back creditors, including senior lender Madison Realty, along with All Year Holdings, Goldwasser, the bankruptcy trustee and attorneys. Notably, the law firm Ackerman, who represented the debtor, will receive $500,000, according to a filing by Goldwasser.
Moskovits did not return a request to comment, nor did the debtor’s attorney. Hutton Capital also did not return a request to comment.
