Narrative
Full Description
Project narrative
On July 2, 2007, Bank of China’s New York Branch issued three interest-only commercial mortgage loans (totaling roughly $32.2 million) to limited liability companies controlled by New Jersey real estate investor Paul V. Profeta. Each loan was secured by a different commercial building and set to mature on July 1, 2017. The three companies: 769 Associates, LLC – $14.35 million loan secured by a multi-story office building at 769 Northfield Avenue, West Orange, NJ; 349 Associates, LLC – $10.5 million loan secured by a commercial building at 349 East Northfield Avenue, Livingston, NJ; L.V.P. Associates, LLC – $7.35 million loan secured by a commercial building at 2128–2144 Millburn Avenue, Maplewood, NJ. The purpose of the loans was to refinance existing debt and provide working capital secured by commercial real estate properties. The loans were interest-only, meaning no principal was due until maturity, at which point the entire balance became due. When the July 2017 maturity date arrived, the companies failed to repay the principal, placing all three loans in default. ollowing the defaults, Bank of China filed foreclosure actions in the New Jersey Superior Court (Chancery Division, Essex County) in 2017. The bank sought to foreclose on each property’s mortgage after the borrowers did not pay off the loans at maturity. The court entered final judgments of foreclosure in favor of Bank of China, starting with the 769 Northfield/West Orange loan. By late 2018, 769 Associates had its answer stricken and a foreclosure judgment was entered for the full amount (approximately $14.35 million). Similar foreclosure judgments were obtained against 349 Associates and LVP Associates by 2019, allowing the bank to schedule sheriff’s sales of the properties. Profeta’s companies contested the foreclosures, raising defenses and counterclaims (e.g. arguing the bank acted in bad faith by invoking cross-default clauses to block loan prepayment). However, these defenses were ultimately rejected. The trial court struck the borrowers’ defenses and permitted the foreclosures to proceed. With legal objections exhausted by the end of 2021, Bank of China moved promptly to conclude sheriff’s sales/asset transfers. The West Orange property had already been transferred in 2019 (under appeal). The Livingston and Maplewood properties were sold by late 2022, once the appeals for those were resolved. All three buildings ultimately ended up in the hands of Altera Fund Advisors, a Dallas-based real estate investment firm specializing in medical and office properties. This effectively marked the final resolution of the foreclosures. In the end, no out-of-court settlement was reached – the dispute was resolved through the foreclosure process. The fact that Altera was able to buy the properties at a discount suggests that Bank of China was willing to accept less than the full debt in exchange for a quick disposition and closure of the matter.
Staff comments
1. Paul V. Profeta remains an active figure in real estate and philanthropy in the region, despite the loss of these three properties. Profeta’s broader real estate business, Paul V. Profeta & Associates, Inc., continues to operate, focusing on other investments in and beyond New Jersey. In fact, Profeta has substantial real estate ventures elsewhere. Notably, Profeta did not declare personal bankruptcy or face any known personal judgments from this case. 2. Rather than repayment from the borrowers, the bank’s recovery came through taking control of the collateral properties and selling them. After the court decisions affirmed its right to foreclose, Bank of China either purchased the properties at sheriff’s auctions (via credit bid) or otherwise took title, and then transferred the buildings to new owners. This process allowed the bank to recoup value from the real estate – though likely not the full $32.2 million, since the properties sold for less than the loan balances.