The Covid-19 crisis stressed an already struggling youth sports complex in Massachusetts, according to Scarsdale real estate developer Stuart Silberberg, and now a “vulture capitalist” is trying to seize control of the project.
SHS ACK LLC, controlled by Boston investor Jeffrey Leerink, sued Silberberg on July 23 in U.S. District Court, White Plains, for $18.1 million.
Silberberg does not dispute that he owes money, but he argues that Leerink is trying to charge excessive interest on a technical default going back four years.
“I don’t think he has a great case,” Silberberg told the Business Journal. “This lawsuit is to pressure me to hand him the keys. … My view is that he is not entitled to $18 million and 18% default interest from four years ago.”
Silberberg is the founder and managing partner of Ajax Advisors, a Manhattan real estate investment firm whose deals are valued at more than $25 billion, according to its website.
In 2016, Ajax and Five Capital Management borrowed $11.5 million from HarborOne Bank for the first phase of a proposed $100 million New England Sports Village in Attleboro, Massachusetts. Silberberg personally guaranteed the loans.
The dream was to build a youth sports complex with an ice rink, tennis courts, soccer fields, fieldhouse, swimming complex and hotel.
“It’s a feel good project,” Silberberg said, “and it was also done to make money.”
The ice rink opened in 2016 but has underperformed, he said, and he has had to continually borrow money to support the original loans.
In 2017, according to the Leerink lawsuit, the loans defaulted because of failures to deposit money in an escrow account, maintain debt service ratios and provide financial disclosures.
Silberberg described the default as technical. HarborOne did not charge default interest, he said, he continued to work with the bank and make the required monthly payments, and he stayed “pretty much current.”
He also put in a new management team that he said began to turn the ice rink business around.
Then the Covid-19 crisis hit. The ice rink was closed for four months and loan payments stopped.
Last December, HarborOne sold the loans to SHS ACK.
“He (Leerink) bought it with the idea that he could charge default interest all the way back to 2017,” Silberberg said.
As of April 21, according to the complaint, Silberberg owed $18,134,252, and interest was accruing at $5,622 a day.
Silberberg said he has tried to consensually restructure the deal, but Leerink insists on collecting more than $18 million.
Leerink accused Silberberg of breaches of loan guarantees. On May 7, he filed a foreclosure action in Massachusetts.
Now, Silberberg said, the project could be headed toward bankruptcy.
“He’s trying to wipe us out,” he said. “You have a vulture investor trying to capitalize on Covid who is using a technical legal argument to try to force people who are hoping to improve the world somehow ”“ and that is the goal of this project ”“ to force their hand.”
Will Leerink succeed? Silberberg asked.
“Stay tuned. But we don’t feel like capitulating to that kind of investment behavior.”
