• Mon. Dec 11th, 2023

    New Lawsuit Claims Lender’s Vengeance Resulted in Developer’s Blacklisting

    BySharna Bass

    Nov 20, 2023
    New Lawsuit Claims Lender’s Vengeance Resulted in Developer’s Blacklisting

    A Miami-based developer, Tzadik Management, has filed a lawsuit against Arbor Realty Trust affiliate, alleging an act of “malicious” vengeance that led to Tzadik being blacklisted from using Fannie Mae. Instead of providing quotes, it can be described that Tzadik Management claims the affiliate spread false information stating Tzadik was going out of business to a Fannie Mae employee who had a previous association with Arbor. Consequently, Tzadik was placed on Fannie Mae’s “do not use” list.

    However, Arbor’s attorney has denied these allegations, stating that Tzadik failed to provide any specific details about the supposed lies. The case comes to light amidst a similar situation where Freddie Mac terminated its dealings with Meridian Capital Group due to an investigation into the brokerage. This development had a significant impact as Meridian is one of the largest commercial mortgage brokerages in the United States, and Freddie Mac is a major source of loans for the multifamily industry.

    It is revealed that Arbor had a close financing relationship with Meridian Capital Group, Capital One, and Greystone, according to Commercial Mortgage Alert. These circumstances add to the challenges faced by Arbor, including a recent short seller report by Viceroy Research, which negatively affected its stock price.

    Tzadik and Arbor had a relationship that began in 2019 when Arbor provided bridge loans for Tzadik’s multifamily acquisitions in Sioux Falls, South Dakota. Although Arbor’s crowdfunding platform also invested in the deal, they exited in 2020.

    Tzadik claims that the relationship deteriorated in 2020 when they sought financing from Greystone for a Houston portfolio instead of Arbor. It is mentioned in the lawsuit that Tzadik offered Arbor an opportunity to match the loan, but they refused and warned Tzadik about regretting the decision. Following this, Tzadik alleges that Arbor initiated a campaign to sabotage their investments in any way possible.

    The lawsuit further alleges that Arbor failed to credit Tzadik for the $1.5 million held in escrow, preventing the refinancing of the Sioux Falls portfolios from closing on time. Additionally, Arbor allegedly refused to refinance the Sioux City portfolio and denied Tzadik the ability to assume the loan on the Rapid City, South Dakota portfolio.

    Tzadik also accuses Arbor of defaming the company by informing employees that its CEO, Adam Hendry, was not creditworthy. They argue that this defamation campaign ultimately led to their blacklisting by Fannie Mae.

    Arbor has denied these allegations and has counter-claimed that Hendry defaulted and owes them for the costs and expenses incurred during the litigation. Although Arbor’s motion to dismiss Tzadik’s amended complaint was denied, they are currently appealing the ruling.

    Source: Commercial Mortgage Alert

    Frequently Asked Questions (FAQ)

    1. What is Fannie Mae?

    Fannie Mae, also known as the Federal National Mortgage Association (FNMA), is a government-sponsored agency that plays a significant role in the U.S. mortgage market. It purchases mortgages from lenders, thereby providing liquidity and promoting homeownership.

    2. Who is Tzadik Management?

    Tzadik Management is a real estate development company based in Miami. They are involved in various acquisitions and investments, primarily in the multifamily real estate sector.

    3. What are bridge loans?

    Bridge loans are temporary financing options used to bridge a gap between the purchase of a new property and the sale of an existing property. They help homeowners or real estate investors cover the immediate financial needs during the transition period.

    4. What is a short seller report?

    A short seller report is a research document created by individuals or organizations that hold short positions on a particular stock. These reports often highlight negative aspects, raising concerns about the performance or integrity of the targeted company.

    5. What is defamation?

    Defamation refers to the act of making false statements about someone, which can harm their reputation. It involves spreading false information that can negatively impact a person’s personal or professional life.