Hundreds of Israeli investors lost a collective $70 million after Madison Realty Capital took control of the failed HAP Seven residential development in Washington Heights.
HAP Investment founders Nir Amsel, Amir Hasid and Eran Polack recently notified investors that the court officially transferred the 4452 Broadway property to Madison Realty Capital following Chapter 11 bankruptcy proceedings in the New York State Supreme Court, Ynetnews reported.
In a letter to investors, the HAP partnership didn’t sugarcoat things: “The consequences of this outcome are severe: it means a total loss of the investment.”
The ambitious project originally called for a seven-story residential building containing 129 units in Manhattan. Construction ground to a halt in June 2021, however, when Madison Realty Capital stopped providing funding during the critical structural phase.
Developers scrambled to find alternative financing to complete the stalled project. The now-defunct public company Migdalor stepped in during 2022, issuing a loan equivalent to $3.8 million to help meet the lender’s conditions and potentially revive construction.
Despite these efforts, the developers could not secure additional financing or attract a buyer willing to meet a $25.5 million asking price. By last March, the partnership filed for bankruptcy protection, leading to the formal transfer notification.
The founders attempted last-ditch negotiations with multiple interested parties after the court approved Chapter 11 protection. “Several parties expressed interest in financing the project, and the company entered preliminary discussions,” the partnership wrote to investors.
No bidders submitted offers above the outstanding loan amount.
HAP did not respond to a request for comment from The Real Deal.
Market conditions severely hampered the project. The pandemic initially halted construction and caused the contractor to abandon the project. Subsequent inflation and sharp interest rate increases dramatically escalated project costs, creating insurmountable financial obstacles.
In the investor letter, the partnership expressed deep regret for its inability to protect investor capital despite injecting additional private funds and working to prevent the failure.
Eran Polack’s HAP acquired the site in 2013 for $7.3 million. In 2019, Madison Realty Capital entered the picture, providing a $52.5 million construction loan to replace existing debt and cover construction costs. HAP was working towards the completion of the project in the third quarter of 2020.
When it was sold in a bankruptcy sale, the project was only 50 percent complete.
— Holden Walter-Warner
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