When Heritage attempted to sell the site to satisfy its mortgage, Bridge City Capital sabotaged the sale, sold the loans to Fortress Investment Group and encouraged potential buyers to purchase the site from Fortress at a lower price, the lawsuit alleges.
Fortress already owned the loan behind 215 Moore St., an adjacent development site also owned by Heritage, on which the company planned to build an office building. Knowing that the two sites were more valuable as an assembly, the developers claim in the lawsuit, Fortress was also seeking the loan of 232 Seigel St.
After buying the hotel site loan in December 2019, Fortress held Heritage in default for failing to complete construction, and the company filed for bankruptcy protection for the property in June 2020.
In March 2021, a bankruptcy judge allowed Fortress to continue foreclosure proceedings on the Bushwick Hotel loan, and by May the lender had filed a lawsuit to take over the project.
An auction was scheduled for February this year.
By the time the lockdown was dropped, the pandemic had thrown Heritage into financial difficulty at its iconic Williamsburg hotel. The company filed for bankruptcy protection for the property in February 2021.
Earlier this month, an investigator concluded that Moskovits and Lichtenstein used an elaborate banking scheme to divert more than $12 million from the hotel to other companies they own, which they denied.
The investigator’s report was riddled with misrepresentations, they claimed in court documents, and that the investigator himself was “in cahoots” with the lender for that building, resulting in a contradictory report.
The business partners are also facing litigation and bankruptcy proceedings regarding a vacant development site at 286 Rider Ave. in the Bronx on which they planned to build an apartment building.
In January, a bankruptcy judge suspended the property’s impending auction after Heritage repaid its lender, Be-Aviv, of $12 million in debt, giving the property development company time to find a buyer, although the property records do not indicate that the property has been sold.
An attorney for the developers did not respond to a request for comment before press time. A lawyer for Fortress also did not respond to a request for comment before press time. Bridge City Capital did not respond to an email seeking comment before press time.