Buys Brooklyn houses at center of a large $92M mortgage fraud scheme
The real estate investment firm DelShah Capital, whose specialty is acquiring assets tied up in court, paid $3.4 million at auction for a package of 21 three-family homes located in Brooklyn’s East New York.
The houses were auctioned in Brooklyn after developer Thomas Kontogiannis pleaded guilty in 2010 in Brooklyn Federal Court to conspiracy to commit bank and wire fraud. Prosecutors said Kontogiannis orchestrated an illegal $92 million mortgage scheme using straw buyers and homes in Brooklyn and Queens, defrauding lenders DLJ Mortgage Capital and Washington Mutual. Nine people were charged in the alleged scam, eight of whom pleaded guilty, while one died in the course of the proceedings. A federal judge in 2011 said it appeared to be “one of the largest mortgage-origination frauds on record.”
In 2011, a New York State Supreme Court judge ordered Kontogiannis’ Companies to turn over the properties to DLJ Mortgage Capital, court records show.
DelShah closed on the portfolio on Jan. 3, city property records show.
DelShah plans to operate the fully-rented homes for about a year, and then begin offering them for sale individually, Michael Shah, the firm’s CEO, told The Real Deal.
“Our basis is $160,000 [each], and we think their market value is $650,000,” Shah said. But he added that small buildings are not their typical acquisition.
The company often purchases properties mired in the foreclosure process, Such As The Commercial Property 55 Gansevoort Street in the Meatpacking District, and residential building 22 Renwick Streetin Hudson Square.
The recently-acquired houses are three-story attached homes located within adjacent city blocks, with addresses including 1432 Loring Avenue and 444 Sapphire Street.
This is the first time DelShah bought anything as small as a three-family house. Indeed, such acquisitions are rare in New York City, even as they have grabbed headlines in other parts of the country.
In other parts of the U.S., private equity firms are snapping up large numbers of distressed, mostly one- and two-family homes. Blackstone, for example, started buying and renting out single-family homes last year, spending $250 million as of July. Additionally, B. Wayne Hughes, the founder of Public Storage, has bought up 10,000 single-family homes across the U.S. through his company American Homes 4 Rent.