Four months after ruling that the former owners of the Monarch 716 student housing complex did not owe the lender any additional money after losing the property in foreclosure, a state judge in Buffalo has reversed herself and awarded a judgment of $3.67 million to Acres Capital.
The basis for the reversal: simple math.
In a new decision, Erie County Supreme Court Justice Deborah A. Chimes acknowledged erring in February, when she rejected Acres’ request for judgment against Buffalo State Ventures – a subsidiary of DHD Ventures – and its principals, Thomas Masaschi of Rochester and Jason Teller of Charlotte, N.C.
Acres’ attorneys had argued that Chimes “overlooked a question of fact” and “misapprehended the law” in her earlier ruling.
Chimes had found the fair market value of the 10-building apartment complex on Buffalo’s West Side to be $44 million at the time of the April 8, 2019, foreclosure sale to Acres. Acres had asserted a much lower valuation of $21.25 million, citing its own appraisal expert and a host of problems with the property. But Chimes accepted the higher valuation of DHD’s expert, whose arguments she found more credible.
However, she had also accepted the court-appointed receiver’s determination that Acres was owed $47.67 million at the time of the sale. “As such, the Court should have granted plaintiff’s motion for a deficiency judgment,” Chimes wrote in her new ruling.
The new decision marks a small victory for Acres, although DHD may still appeal. But it’s still a far cry from the $26.4 million that the lender sought, based on its lower appraisal. Chimes did not accept Acres’ new arguments to justify accepting its lower valuation.
Now Acres must seek to recoup as much as it can from selling the property to cover the loan balance that it was owed at the time.
Monarch 716 is one of three student housing projects that were built by DHD, a developer that was particularly active in the Rochester and North Carolina markets. It’s the only project the firm undertook in Buffalo.
DHD and its contractors built the 592-bed project at 100 Forest Ave., on the site of a former pharmaceutical manufacturing plant between Grant Street and the Niagara Thruway. The complex, which was largely aimed at SUNY Buffalo State despite not having a formal agreement with the school, features nine four-story buildings with 176 suites, plus a one-story clubhouse and a pool.
DHD borrowed $36.38 million from Acres, an administrative agent representing three insurance companies, but ran into trouble with the project as soon as it opened in August 2017. The project’s completion had been delayed, the management company struggled to fully lease it, and there were multiple complaints about leases and even safety. As a result, occupancy and revenues declined.
DHD tried unsuccessfully to sell it, then defaulted on the loans, and Acres foreclosed.
Posted by The Buffalo News