A lender nabbed another property from Prodigy Network as the troubled crowdfunding firm is in the midst of bankruptcy proceedings.
Vanbarton Group foreclosed on the company’s co-working and co-living facility at 17 John Street known as the Assemblage John Street, according to property records. The deal was valued at $83 million.
Vanbarton provided a $36 million junior mezzanine loan to fund the project developed by Prodigy in partnership with Shorewood Real Estate Group in 2018. The lender and real estate investment firm, led by Gary Tischler and Richard Coles, initiated a UCC foreclosure sale in April.
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Located in Manhattan’s Financial District, The Assemblage John Street, was among Prodigy’s most well known assets and a symbol of the company’s success in attracting retail investors to buy into its business model. Prodigy was founded by Rodrigo Niño, a former real estate broker, who crowdfunded money from small-time investors largely in South America. He was able to raise more than $50 million of equity for The Assemblage John Street.
But the project had struggled to break even for about a year after it opened in April 2018, according to investor materials reviewed by The Real Deal. Prodigy turned the red ink to black in the second quarter of 2019, but the company’s income still fell below expectations.
About a year later, Niño died of cancer. The company has since continued to implode and investors have filed lawsuits alleging they were misled on their investment returns. Prodigy is now facing more than a dozen lawsuits from investors who reportedly poured more than $690 million into its investment platform. The company filed for Chapter 7 bankruptcy in March, which means it will not reorganize.
The John Street property is not Prodigy’s first to be taken over by a lender. Prodigy and Shorewood Capital’s NoMad House at 114 East 25th Street and Park Avenue South House at 331 Park Ave South were acquired by Arbor Realty Trust last year.
Vanbarton has been active in acquiring properties through UCC foreclosure auctions. The company recently acquired a planned office tower site at Fifth Avenue and West 29th Street by HFZ Capital Group and Marble Collegiate Church’s project through a UCC foreclosure. In December, Vanbarton Group, as a mezzanine lender, took control of Prodigy’s AKA Wall Street, an extended-stay hotel at 84 William Street.
While commercial foreclosures are still prohibited under New York state law, UCC foreclosures bypass the courts system.
Unlike a traditional foreclosure, in which a lender takes control of a property outright, UCC foreclosures allow lenders to take control of an equity interest in the property, which makes them liable to a senior loan. The lender is required to schedule an auction to sell these interests, but can make a credit bid, using its existing debt, to take control of the property.
Attempts to reach Prodigy were unsuccessful. Lawrence Davis of Shorewood Real Estate Group did not immediately return a request for comment. Vanbarton Group also did not respond to a request to comment.