Shaya Prager’s Manhattan Investment Strategy

In February 2022, Shaya Prager found a four-story townhome at 311 East 51st Street in Midtown East and paid $4.5 million.

Prager has become infamous for his use of an ownership structure involving ground leases to take out loans worth more the value of his real estate purchases, which were typically in office parks in suburbs like Florham Park, New Jersey, and Bloomington, Minnesota. He and partners borrowed more than $3 billion, according to a review of loan docs by The Real Deal.

Yet Prager’s play wasn’t limited to one kind of investment or one kind of financing technique. (His efforts are particularly wide-ranging: the Lakewood, New Jersey, resident also dabbled in the medical waste business and Covid mask trade.)

In the easy-money years at the beginning of this decade, he was also buying property in New York City. A closer look at three buildings, including the Midtown East townhome, which Prager, his wife or someone with the same corporate address as Prager own, crystallizes some of his other strategies as well as the crucial roles of other players in his network.

Many of Prager’s properties are now facing foreclosures, and two lenders have filed lawsuits against him over the ground lease structure, alleging that Prager has not been forthcoming. Prager’s lawyers claimed lenders were aware of this common beneficial ownership prior to making the loans. One of those suits has been settled.

The flip

The day Prager bought the Midtown townhome, a rental property, he secured the $1.6 million loan from an entity signed by now-embattled real estate attorney Mark Nussbaum.

Nussbaum represented Prager’s wife and is the agent for Prager’s firm Opal Holdings. The transactional attorney often syndicated money from the Orthodox community to provide bridge loans to investors to flip properties, collecting a point or two on the way.

And flipping was the plan.

In April 2022, just two months after buying 311 East 51st Street, Prager flipped the property to Katherine Cartagena for $6 million, an impressive 33 percent increase in price. Cartagena, a novice investor who just seven years ago was taking classes at NYU, is Prager’s go-to deal partner, and this deal illuminates more details about the business relationship between the two.

Prager’s lawyer has described the duo’s relationship in technical terms. Cartagena acted “as the registered agent” on certain properties, while Prager’s firm, Opal Holdings, was an “asset manager,” on those properties, Prager’s attorney said.

Cartagena secured a $3.15 million loan that same month from the Queens-based Cross County Savings Bank to close on the deal. Another Lakewood establishment, Riverside Abstract served as the title company for the transaction.

A spokesperson for Prager claimed the property was vacant at the time of his purchase. Prager then “made a significant investment to improve the condition and value of the property,” the spokesperson said.

“Mr. Prager’s investment made the property a more attractive rental property and fully leasable,” said the spokesperson.

City building records do not list any permitted work during Prager’s two-month ownership. Repairs and construction work in New York are notoriously time consuming. Small repair jobs such as painting, however, do not require permits.

The Department of Justice and the Federal Housing Finance Agency are increasingly looking at flips or quick sales between related parties.

One common scheme is to purchase a property and then quickly sell it to a straw buyer at a higher price. The owners use the fake higher price to obtain a larger loan from a lender, usually Fannie Mae or Freddie Mac, than they otherwise would have received. The goal of the flips, and other schemes was to buy real estate with no equity.

In one instance, Riverside Abstract provided the closings for a fake flip of an office complex in Troy, Michigan. The conspirators involved in the deal have pleaded guilty to wire fraud.

In the fraudulent Troy deal, Riverside provided a $30 million bridge loan to ensure the conspirators could secure a loan and close on the transaction. Riverside has not been charged with any wrongdoing. Fannie Mae has put Riverside on its blacklist.

To be sure, flips are common in New York City real estate, and there is nothing illegal about a flip between two unrelated parties. Some titans like David Werner have made a fortune signing contracts to buy properties, then selling them to partners at a higher price.

There is no allegation the sale by Prager or Cartagena had any element of wrongdoing. There is no known investigation into the transaction or any transaction pertaining to Prager.

The short-term rental

Cartagena was able to buy and find financing on these properties, but operating and managing is another skill set. When Cartagena took over properties, she often ran into trouble.

The New York City’s Mayor’s Office of Special Enforcement said that Cartagena had illegally converted 311 East 51st Street to short-term rentals. Amid a crackdown on such operators, Cartagena and her brokerage, Mega Home, settled with the city and agreed to pay a fine of $845,000.

“Ms. Cartagena and her corporate entities deceived and endangered guests while profiting from her short-term rentals, but she ultimately ceased the illegal activity and accepted responsibility after being contacted by the Office of Special Enforcement,” Christian Klossner of the Mayor’s Office of Special Enforcement wrote in a statement.

The mayor’s office also alleged Cartagena illegally ran short-term rentals at 207 West 75th Street, a seven-story building on the Upper West Side. Prager’s Opal Holdings developed the building. The most recent property records were signed by Prager’s wife, Shulamit Prager, in 2022.

Neither Prager nor his wife were named in the lawsuit brought by the mayor’s office. They have not been charged with any wrongdoing.

“We cannot speak to the allegations by OSE [the Office of Special Enforcement] against Ms. Cartagena,” Prager’s spokesperson said.

Cartagena did not return a request for comment.

It’s unclear whether the short-term rental plan was the idea all along, or just a stopgap until Cartagena found another way to use the building as a vehicle to extract money through refinancing.

But Cartagena has actively sought to clear her name since the settlement.

Cartagena reached out to the real estate news publication Brick Underground last summer asking the outlet to remove an article published about her settlement.

“I acknowledge the wrongdoings mentioned in the article and sincerely apologize for my actions. I have taken significant steps to rectify my behavior,” Cartagena wrote in an email to the publication, which was reviewed by TRD. “My intention has always been to grow from my mistakes and contribute positively to society.”

Jennifer White Karp, managing editor of Brick Underground, told Cartagena the publication would not honor her request, citing journalistic responsibility to report on the news.

“No worries,” Cartagena replied in an email. She said she would have the article “suppressed regardless.”

Cartagena was likely referring to firms who seek to repress articles in search engines in order to bury unflattering news.

Cartagena graduated from St. John’s University in 2011. She founded her own firm, Prana Equities, the year she started her graduate degree at NYU. Prana is a “fast-paced, privately-held real estate investment firm headquartered in New York,” its website reads.

Social media posts show her traveling through Europe. She often poses alone in front of historic points of interest in Paris, London and Spain.

In 2015, she posted about meeting Brian Chesky, CEO of Airbnb.

“What an inspiration! #ulifall #airbnb #inspiration #NYU #sanfrancisco,” Cartagena posted on Facebook, along with a grainy photo of her with Chesky.

The Murray Hill renovation

Prager’s favored partners Shimon Katz and Cartagena inked a deal to acquire their own rental property in Murray Hill at 111 East 38th Street for $10.3 million.

Little is known about Katz; no photo of him exists online. He worked at Grandview Developers in Philadelphia, but a company representative told TRD that Katz is no longer there. The representative declined to answer questions about how to reach Katz, who is still listed on the firm’s website.

Katz and Prager share the same business address at 950 Airport Road in Lakewood, New Jersey. The two have more links. Both are involved in an oceanfront mansion in Golden Beach, Florida, which is on the market for $68 million. Shimon Katz signed as the LLC’s managing member on both mortgages. The two also signed their names on Fort Worth’s tallest building, Burnett Plaza, which the lender foreclosed on last year.

Prager has denied any ties to the Murray Hill property.

“Mr. Prager has never had any involvement in that property as an investor or otherwise,” his spokesperson said.

In September 2022, Cartagena penned her initials with a large K and a line through the middle on a $8 million mortgage for the East 38th Street property from a mysterious entity which traces its address back to Riverside Abstract’s office in Brooklyn. Riverside was also the title agency.

Just three months later, Cartagena scored a $10.5 million refinancing from Greystone. Next, Greystone assigned the loan to Fannie Mae. In the space on the loan documents for the address for the borrower’s chief executive, however, Cartagena’s home or office isn’t listed. Instead the address is for Nussbaum’s law office.

(Nussbaum is now in crisis after clients alleged he has refused to hand over escrow money he allegedly used for loans, according to two lawsuits and sources. Nussbaum has claimed some of the allegations are a “confused mess of scandalous conspiracy theories.”)

Agency lenders Fannie and Freddie buy loans from private lenders and bundle them together to sell to investors. The government-sponsored enterprise often assumes the risk if a loan goes bad.

Greystone’s $10.5 million loan price was larger than the $10.3 million acquisition price. This is not always a red flag. Borrowers often obtain higher loans to renovate buildings.

But the players involved — Riverside, Cartagena, Katz and Nussbaum as the attorney — have all been tied to transactions where mortgages were obtained for amounts equal to or larger than what the property just sold for. In this case, the quick Fannie loan presented Cartagena the opportunity to own the property with no equity in it in just three months.

Cartagena’s firm tried to start improvements for the property. She seems to be seeking to convert one-bedroom units to three bedrooms, according to complaints received by the Department of Buildings.

Last year, a stop work order was issued by the New York City Department of Buildings. The owner then received another violation for tampering, removing or defacing a posted stop work order.

So far, no one has responded to the violation.