Boymelgreen bank first to fail in NYC in 11 years
Real estate developer's many woes are topped off by federal regulators seizing his LibertyPointe Bank and selling it at steep discount to Valley National Bank.
By Aaron Elstein • Crain's
Real estate developer Shaya Boymelgreen's Web site proclaims his finance business is “built on a solid foundation.” He might wish to revisit that statement after federal regulators seized LibertyPointe Bank, an institution that he helped start and served as chairman.
LibertyPointe late Thursday became the first New York City bank to fail in 11 years. For Mr. Boymelgreen, it was just the latest turn of the screw.
In January, he was evicted from his corporate headquarters in Brooklyn after the landlord said Mr. Boymelgreen stopped paying rent. Several of his real estate projects are stalled, and he faces a flood of lawsuits alleging everything from failure to repay loans to fraud and negligence, as well as breach of contract related to the construction and sale of two condominium projects.
It's a painful turn in fortune for the Israeli immigrant who made a big splash during the housing mania by converting lower Manhattan office towers into condominiums. His conversions include 20 Pine St., 23 Wall St. and 15 Broad St. He and a partner also bought properties in Miami and Las Vegas.
Mr. Boymelgreen branched into banking in 2005, starting LibertyPointe with a partner named Meyer Eichler, the founder a Coney Island Avenue bookstore that bills itself as the world's largest Judaica store. The idea was the bank would serve Brooklyn's Orthodox Jewish population.
“Money is begging us to come out,” Mr. Eichler told The Brooklyn Paper at the time. A person who answered the phone at his bookstore Friday said Mr. Eichler wasn't available to comment. Mr. Boymelgreen didn't return a call seeking comment.
LibertyPointe grew to two branches in Brooklyn and one in lower Manhattan and had $210 million in assets and a like amount of deposits. While Mr. Boyelgreen attended board meetings, he wasn't involved in its day-to-day operations and former management said the bank's funds weren't used to fund his real estate projects.
The unprofitable bank was a dismal lender. Fully 22% of its loan portfolio wasn't collecting interest at the end of last year, according to federal regulatory data. Last July, regulators issued a cease-and-desist order, saying the bank had excessive levels of delinquent loans, too much exposure to commercial real estate and inadequate loan-loss reserves. Regulators ordered the bank to raise additional capital last October, but management was unable to do so and on Thursday evening the clock ran out.
LibertyPointe's accounts were transferred to New Jersey-based Valley National Bank, which agreed to take only about $20 million of the failed institution's loans. The Federal Deposit Insurance Corp. will share losses with Valley on the rest. The FDIC estimated that LibertyPoint's failure would cost its deposit insurance fund $24.8 million.
A call to LibertyPointe's chief executive, Merton Corn, wasn't immediately returned.
[Hat Tip: Nachos.]