Real Estate

Developer Alleges Arbor Got It Blacklisted From Fannie Mae

A Miami-based developer alleges that lender Arbor Realty Trust affiliate got it blacklisted from using Fannie Mae in an act of “malicious” vengeance. 

Adam Hendry’s Tzadik Management alleges in a lawsuit that the Arbor affiliate spread lies about Tzadik going out of business to a Fannie Mae employee who was a former Arbor employee. As a result, Tzadik claims, it was placed on the government-sponsored agency’s “do not use” list. The agency is a major purchaser of commercial real estate loans, making it an essential element in many deals.

Arbor’s attorney denied the allegations in a filing in New York state court, claiming Tzadik failed to provide any details about the alleged lies.

Tzadik’s allegations come to light as Fannie Mae’s brother organization, Freddie Mac, halted its dealings with Meridian Capital Group stemming from an investigation into the brokerage. The news sent shockwaves throughout the industry, as Meridian is one of the country’s largest commercial mortgage brokerages and Freddie Mac is a huge source of loans for the multifamily industry.

Meridian had a close financing relationship with Arbor Realty along with Capital One and Greystone, according to Commercial Mortgage Alert.

Arbor is facing a number of challenges, including being the subject of a short seller report last week by Viceroy Research that helped push down its stock price.

Tzadik and Arbor’s relationship began around 2019 when Arbor provided two bridge loans for Tzadik’s multifamily acquisitions in Sioux Falls, South Dakota. Arbor’s crowdfunding platform, ArborCrowd, also invested equity in the Sioux Falls deal, but exited in 2020.

Tzadik alleges things went south around 2020, when Tzadik turned to Arbor’s competitor Greystone to finance a deal for a Houston portfolio. Tzadik says it had provided Arbor a chance to match the loan, but Arbor turned it down and “warned that Tzadik would regret using Greystone for this deal,” according to the suit.

At that point, “Arbor began a campaign to sabotage Tzadik’s investments in any manner that it could,” Tzadik alleges in its filings.

Tzadik alleges that Arbor refused to credit the developer for its $1.5 million held in escrow in time to close on a refinancing of the Sioux Falls portfolios. The lawsuit says Arbor failed to refinance its Sioux City portfolio and would not allow Tzadik to assume the loan on a Rapid City, South Dakota portfolio.

The suit also alleges that Arbor defamed Tzadik, informing employees of Tzadik entities that Adam Hendry was not creditworthy. The alleged defamation campaign, Tzadik argues, led to its being placed on Fannie Mae’s blacklist.

Arbor has denied the allegations in its filings. It alleges that Hendry defaulted and owes Arbor for costs and expenses it incurred defending the litigation.

Arbor’s motion to dismiss Tzadik’s amended complaint was denied. Arbor is appealing the ruling.

Neither Arbor nor its attorney immediately responded to a request for comment.

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