Developer Celal Ozkan filed for bankruptcy on his North Miami Beach development site for a 341-unit apartment tower, marking the latest in his nearly yearlong dispute with the lender.
Sky Gardens Residences, an entity tied to Ozkan, CEO of Turkish firm CEO Contract, is pursuing Chapter 11 reorganization on the 1-acre site at 16300 Northeast 19th Avenue. The developer listed between $10 million and $50 million in assets, and between $1 million and $10 million in liabilities, according to the bankruptcy petition filed on Friday.
Ozkan had paid $5.2 million for the site in 2020 and scored city approval for the 19-story SkyGarden tower with 27,000 square feet of retail in 2021. CEO Contract, which has offices in Istanbul and New Castle, Delaware, is a family firm primarily providing contractor services for projects in Europe, and also invests and develops real estate, according to its website. Ozkan also is CEO of Miami-based PIM Construction, his LinkedIn shows.
In 2022, Miami Beach-based Safe Harbor Equity provided an $8.5 million financing at 8.75 percent interest with a one-year term, with two six-month extension options, according to the loan agreement.
Construction has not started.
The bankruptcy filing comes amid Sky Gardens and Safe Harbor Equity’s Miami-Dade Circuit Court battle.
The developer “felt strongly” about its lawsuit claims, but filed for bankruptcy reorganization due to mounting litigation costs, attorney Michael Seese, who represents Sky Gardens in the Chapter 11 case, said in a statement.
“We hope to have a dialogue with our lender and pursue closing construction financing,” Seese said. “Alternatively, my client will consider pursuing a joint venture or sale of the asset.”
Sky Gardens first sued Safe Harbor in April, accusing the lender of usury and manufacturing default claims against the borrower, even though it had met its debt obligations, according to the complaint.
Issues arose when Sky Gardens sought to use one of its extension options in 2023, and Safe Harbor refused, citing “pretextual defaults.” Instead, the lender “coerced” Sky Gardens into an amended loan agreement that included an $800,000 principal paydown and $970,000 in fees, according to Sky Gardens’ suit.
As Safe Harbor collected these payments, as well as loan interest, it knew that the 2022 property taxes still were overdue, the complaint says. At one point, after collecting payments, the lender tried to impose a default interest rate due to the allegedly unpaid property taxes, according to the complaint. The default interest and other fees Safe Harbor quoted amounted to more than the 25 percent maximum annual interest rate allowed in Florida. Altogether, the default interest amounted to $1 million, hindering Sky Gardens’ ability to refinance, the complaint says.
Safe Harbor “schemed to bleed SkyGarden dry and take the project for themselves,” according to Sky Gardens’ complaint, which calls the lender “greedy” and “predatory” and accuses it of a “‘loan-to-own’ scheme.”
Safe Harbor advised at least one lender against doing business with Sky Gardens, and at one point offered Sky Gardens to deed the project to Safe Harbor in exchange for joint venturing on the development, according to the complaint.
Sky Gardens’ claims against Safe Harbor are “frivolous,” said Christopher Spuches, the lender’s attorney. “This is the typical type of nonsense borrowers allege when they can’t make payments. … And once they can’t pay, they claim, ‘Oh, we [Safe Harbor] are the bad guys,’” he said, adding that in depositions under oath Sky Gardens admitted it defaulted on its debt obligations.
Sky Gardens’ own expert steered clear of using the word “usury” in court, Spuches said.
Safe Harbor, a private equity firm that specializes in distressed real estate debt, responded with a countersuit in June for foreclosure on the $7.7 million outstanding loan balance.
Safe Harbor’s foreclosure alleges Sky Gardens defaulted on its loan obligations because it was late with interest payments in January 2023 and March of last year, failed to maintain insurance and didn’t fully and timely pay 2022 property taxes, according to the counterclaim.
Safe Harbor “always tries to resolve things amicably,” Spuches said. When Sky Gardens couldn’t pay the principal at maturity in 2023, Safe Harbor granted a settlement and extension agreement, and not an amended loan as the borrower claims, he said.
Generally, a bankruptcy filing pauses pending foreclosure lawsuits. Some borrowers file for bankruptcy on the eve of a scheduled auction, allowing time to restructure their financing and avoid losing an asset.
In the Sky Gardens-Safe Harbor litigation, no judgment was issued, Seese, the borrower’s attorney, said. This includes no judgment issued in the foreclosure case. But the foreclosure suit was scheduled for a hearing on Monday –– or the next business day after the Chapter 11 filing, court records show.
The judge was expected to enter a final judgment against Sky Gardens at the hearing, Spuches said. “In our opinion, [the bankruptcy filing] was to avoid that hearing,” he added, “because they thought that was not going to go well for them.”
The bankruptcy filing lists the land’s appraised value at $18 million and the project’s value at $161 million once completed.
“Based on the appraised values of the land and the project on a fully stabilized basis,” Seese said, “we believe there is substantial equity in the property.”
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