BETHPAGE, N.Y. – A local homebuilder has filed suit against Bethpage FCU claiming New York's biggest credit union reneged on a deal to fund a senior citizens condominium project in Port Jefferson, on Long Island’s north shore, because it was already brushing up against the federal limit on member business loans.
Jim Tsunis and Enrico Scardo, owners of Northwind Group, claim the $4.5 billion credit union terminated its commitment for a $10 million construction loan that would have provided funding for a 43-unit development, called Liberty Meadows overlooking Long Island Sound, costing them millions on construction delays and forcing them to reduce the prices of the condos.
The suit claims the failure to fund the loan was due to Bethpage FCU bumping up against the federal 12.25% of assets limit on member business loans, which prevented the credit union from extending additional MBL credit at the time. “Upon information and belief, at the time of its agreement to fund the Senior Citizen Project, BFCU did not have statutory authority to finance the construction of the Senior Citizen Project for the agreed amount,” says the suit.
“Had (Bethpage) informed plaintiffs that complete funding of plaintiffs’ construction project was contingent upon defendant’s ability to comply with federal law and regulations and its financial standing at the time advances were to be made, plaintiffs would have sought and been able to finance the project with another bank or financial organization which had the expertise and ability to properly handle the funding of the Senior Citizen Project,” the suit says.
Kirk Kordeleski, president of Bethpage FCU, denied the allegations. He said the development loan was rejected on its merits because of the risky nature of the loans. He also said it was not true that Bethpage was brushing up near the MBL limit. "All you have to do is read our 5300 to see that," he told the Credit Union Journal. In fact, Bethpage's latest 5300 shows it has $375 million in MBLs, about 8% of its assets.
Steven Pinks, a lawyer for the developer, said they still cannot understand why their loan was turned down. He said the appraisal came in over the value of the loan and another lender agreed to finance the project soon after Bethpage walked away. "This was a no-brainer for another bank," said Pinks. "I just don't understand why Bethpage rejected it."
The suit, filed in the New York Supreme Court for Suffolk County, claims the credit union’s action caused 15 months of delays in construction, which only restarted recently after the developers obtained financing from Valley National Bank.
The suit says the developers began their relationship with the credit union in April 2010, when the credit union offered to refinance a shopping center they owned. The partners rejected the credit union’s offer, but suggested Bethpage FCU fund its condo project instead and the credit union agreed. The credit union subsequently agreed to lend $15 million for the project, and later reduced that amount to $10.5 million. According to the suit, the credit union dragged its feet presenting the proposal to its loan committee and the loan was eventually denied.
The failure to approve the loan, according to the developers, led to a 15-month delay and their inability to pay subcontractors and for materials on time, hurting the developers’ reputations. “Solely as a result of the construction delay which was caused by BFCU’s refusal to fund the Senior Citizen Project, plaintiffs lost credibility in the community which resulted in the loss to it of potential sales,” says the suit.
