N.Y. developer of $500M Duluth real estate project files for bankruptcy protection for different Duluth venture

New York developer Luzy Ostreicher on Tuesday starred in a public groundbreaking for one of the city’s largest private investments in years — a $500 million hillside real estate project overlooking Lake Superior.

A day earlier, a separate Ostreicher real estate venture in Duluth, Endi Plaza LLC, quietly filed for bankruptcy after its lender said it falsified financial statements and defaulted on a nearly $52 million loan.

The Ostreicher arm in 2021 bought the Endi apartment complex on Duluth’s east side near the lakefront. In November, Fannie Mae sued Endi Plaza LLC and asked a state court to appoint a receiver to essentially run the company.

Endi Plaza on Tuesday filed for Chapter 11 bankruptcy protection, which allows a company to reorganize its finances while shielded from ongoing litigation and the claims of its creditors.

Ostreicher is the force behind Incline Village, a planned collection of buildings that would house 1,180 apartments, 120 condominiums and retail space. It’s expected to cost $450 million to $500 million and would sit on the 53-acre site of the former Duluth Central High School.

Ostreicher was in Duluth on Tuesday, celebrating the commencement of Incline Village’s construction with Duluth Mayor Roger Reinert and other city dignitaries. Reinert did not return a call requesting comment, nor did Roz Randorf, the City Council president.

Incline Village’s first phase will receive $75 million in redevelopment tax increment financing (TIF) from the city, intended to pay Ostreicher back for infrastructure such as utility connections. Subsequent TIF districts, one needed for each phase, still need to be approved.

Apart from Incline Village, Ostreicher’s investments in Duluth total $85 million, anchored by the Endi and Kenwood Village apartment and retail complexes. The Endi, located at 2120 London Road, has 142 apartments and 13,876 square feet of retail.

Ostreicher’s Endi Plaza LLC in 2023 took out a $51.8 million mortgage on the property. The lender, Greystone Servicing, assigned the Endi Plaza loan to Fannie Mae, a government-sponsored mortgage company.

Fannie Mae declared Endi Plaza in default in early September after four months of missed payments.

Endi also defaulted because “various financial reports” it supplied to Fannie Mae showed “significant inconsistencies and inaccuracies,” the mortgage agency said in filing in St. Louis County District Court. “At least one of the financial reports contains false information that is the result of fraud, gross negligence, willful misconduct, or material misrepresentation or omission.”

Endi Plaza is “siphoning rents” from the property “for the benefit of others, and to the detriment” of Fannie Mae, the court filing continued. Endi Plaza also allegedly granted an encumbrance on the property to a New York attorney, an attempt to keep it “out of reach” of Fannie Mae.

An attorney in Duluth representing Endi Plaza declined to comment.

Endi Plaza LLC filed Chapter 11 filing in U.S. Bankruptcy Court for the Southern District of New York to seek “relief” from the Fannie Mae suit. Chapter 11 bankruptcy freezes Fannie Mae’s attempt to appoint a receiver over the company.

Endi Plaza LLC, based in Monsey, N.Y., said in a bankruptcy filing that its Duluth property was dealing with “substantial increases in operating expenses and certain commercial vacancies” this spring. Also, a preferred stock investor from Toronto put an unauthorized “restrictive covenant” on the property.

Endi Plaza has $50 million to $100 million in both assets and liabilities, according to its bankruptcy filing, though it hasn’t yet disclosed its list of creditors. The company noted it will have to restructure debts with various unsecured lenders, including Lift Bridge Partners, which is owed $8.6 million.

Ostreicher said in a statement released Thursday that all funding is in place and secure for Incline Village and that is it separate from others his family has, including Endi. He said no government funding is at risk and everyone will continue to be paid on schedule.

“The reality of large development projects is that they often come with disagreements along the way. Then all sides eventually come together and these matters get resolved.” Ostreicher said. “That’s the case with Endi. This will be settled in the near future. But nothing related to those interactions has any bearing whatsoever on Incline Village.”

This story includes reporting from staff writer Jana Hollingsworth.