DHD Ventures, the Rochester-based developer that built the Monarch 716 student-housing complex near SUNY Buffalo State, has lost possession of its sprawling 15-month-old property on Forest Avenue.
A state Supreme Court justice in Buffalo last week approved a request by the lenders on the project to foreclose on $38.8 million in mortgage debt, authorizing a court-appointed referee to start the process of selling the property at auction.
In her brief ruling, Justice Deborah Chimes dismissed the arguments of DHD principals Thomas Masaschi and Jason Teller, who had sought more time to secure alternate financing that would pay off the three insurance companies who had provided two loans.
Instead, she granted the motion for summary judgment by Acres Capital, which was acting as an administrative agent for Reliance Standard Life Insurance Co., Philadelphia Indemnity Insurance Co. and Safety National Casualty Corp.
And she appointed attorney Ray Walter of law firm Magavern Magavern Grimm – also a departing state assemblyman – as the "referee" and directed him to calculate the precise amount that is owed and determine if the property should be sold as one or in parcels.
No date was set yet for a sale, which would not affect any of the students living in the complex, since Monarch 716 is already under the control and management of a court-appointed receiver.
Nevertheless, the court order appears to mark an end to DHD's involvement with a costly project that went awry almost from the start.
DHD, through its Buffalo State Ventures subsidiary, had developed the 10-building student-housing project at the site of a former pharmaceutical manufacturing plant between Grant Street and the Niagara Thruway. Officials touted it as a luxury-style complex with a host of benefits and amenities that would be unique and attractive for students.
The project, which is largely aimed at Buffalo State and other nearby schools, features nine four-story buildings with 176 suites and 592 beds, plus a one-story clubhouse and a pool. It opened to tenants with great fanfare in late August 2017, but never had a relationship with Buffalo State and was quickly embroiled in trouble and controversy instead.
DHD and its first property management company, King Residential Group, sought to fill the complex quickly with discounts and other incentives, while also taking in nonstudent tenants, so they could show better occupancy and financial results to Acres. But tenant complaints mounted, criminal activity spread, and about 100 occupants were evicted for not paying the rent, dragging down the revenues. DHD put the property up for sale, initially seeking as much as $60 million, though it never found a buyer.
Meanwhile, contractors and vendors on the project – including general contractor Kulback's Construction – filed more than $3.5 million in liens against DHD for failing to fully pay bills from the construction. Finally, Acres – which had extended mortgages totaling $36.3 million on behalf of its three clients – initiated the foreclosure in May after DHD defaulted.
One of the project vendors, Home Furnishings Resource Group of Hermitage, Tenn., had even filed its own lawsuit last January, seeking to seize the beds, desks and other furniture that it had provided to DHD. The company tried this week to assert that its claim had priority over Acres, at least for the furnishings, but the judge rejected the arguments and awarded Acres possession of everything.