The Uniform Commercial Code, which governs commercial transactions in the U.S. says that auctions like this one must be commercially reasonable. The sale, which was arranged in just two months, scheduled in the middle of a pandemic and will only sell the individual loans as one package, is far from that, HFZ argued in court papers. It would also make it impossible for the developer to sell more condo units in hopes of paying off more debt.
“The appropriate way to auction off the membership interests would be to allow a bidder to bid not on only the entire portfolio but to allow bidders to bid on one, two three or all four or any combination,” said Y. David Scharf, one of HFZ’s lawyers on the case.
Feldman’s company acquired the properties—88-90 Lexington Avenue, The Astor at 235 West 75th Street, and Fifty-Third and Eighth at 301 West 53rd Street— for $610 million in 2013 and refinanced them in 2016.
HFZ borrowed more than $89 million from CIM in 2018 to pay off its old debts and continue development on the buildings.
After HFZ defaulted on its first loan payment, the company began negotiating with CIM to modify the loan and ask for more time to sell condo units to pay down the debts, to no avail.
CIM asked HFZ for $8 million in exchange for modifying the loans, but refused to commit to canceling the auction. In September, CIM announced the foreclosure sale would take place on Nov.12, just two months away.
The sale was schedule for noon Thursday, but the federal judge transferred the case to Manhattan State Supreme Court, which granted HFZ a temporary restraining order for the time being.
Earlier this summer, HFZ was sued by Omnibuild Construction over a $100 million construction bill that had gone unpaid at The XI, a pair of condo towers designed by Danish architect Bjarke Ingels.
CIM Group and its representatives did not respond to a request for comment.