A lender has secured a $14 million judgment against the troubled owner of downtown Cleveland’s 55 Public Square, in a legal action that could spur an ownership change.

Local investors who hold a note on the 22-story building lodged a complaint Tuesday, Dec. 1, against an affiliate of Optima Ventures, a Florida-based landlord mired in lawsuits and caught up in an international money-laundering investigation.

In their filing in Cuyahoga County Common Pleas Court, the noteholders say that Optima affiliates defaulted on the debt several months ago by missing principal, interest and property-tax payments. A judge swiftly decided against Optima, positioning the lender to take control of the property.

The speedy judgment resulted from a cognovit note, a special type of promissory note that gives lenders a faster, cheaper path to recoup losses when a borrower stops making payments. When an Optima executive signed the $18.5 million note tied to 55 Public Square in May 2018, he gave up the company’s rights to notice, hearings or a trial in the event of a default.

The judgment lays the groundwork for a foreclosure and sale of the property.

But Optima already is exploring a sale — in a move that could preempt more legal maneuvering.

Doug Price, CEO of the K&D Group of Willoughby, confirmed in an interview this week that he’s in talks with Optima about buying and redeveloping the struggling office building. K&D took a run at 55 Public Square in 2018 but ultimately walked away from the deal.

Now the Sherwin-Williams Co. plans to build its new headquarters only steps away, on parking lots just off Public Square. And Price sees 55 Public Square as a post-pandemic play, with the potential to become apartments and fresh commercial space a few years from now.

“We’ve had ongoing discussions, on and off, for a long time,” he said of Optima, adding that the parties don’t have a signed agreement.

Chaim Schochet, an Optima investment executive who oversees the company’s assets in Cleveland, declined to comment.

Public records show that the collateral for the 55 Public Square loan includes not only the building and its garage but also close to an acre of land at East 12th Street and St. Clair Avenue, immediately east of Optima’s One Cleveland Center office complex.

The recent court filing reveals that the lender has been pressing Optima to sell. But the company’s efforts to unload or refinance real estate are being complicated by a cloud of litigation and federal scrutiny.

In a civil suit filed in Delaware last year, a Ukrainian Bank asserts that Optima executives used money from fraudulently obtained loans to buy real estate in Cleveland and other cities. That lawsuit casts the purchases as part of a money-laundering scheme engineered by two oligarchs.

The Justice Department made similar allegations in August, in civil forfeiture complaints involving Optima properties in Kentucky and Texas. Those filings followed FBI raids of Optima’s offices in Cleveland and Miami Beach.

An attorney representing Optima executives Mordechai Korf and Uriel Laber has described those claims as “false and completely without merit.”

The litigation has clouded 55 Public Square’s title, preventing a sale, and has hindered attempts to secure historic tax credits for a makeover of the building, Brent Silverman, a lawyer for the lender, wrote in a September letter attached to the recent judgment request.

Add in deterioration, deferred repairs to the garage and economic fallout from the coronavirus pandemic, and “the property is currently non-sellable, non-financeable and declining in value,” Silverman wrote on behalf of a lender group managed by Northeast Ohio homebuilder Sam Petros.

In that letter, the noteholders offered to hold off on a foreclosure if Optima moved quickly to sell the property for more than the outstanding debt — with consent from the Justice Department and any other governmental or regulatory entities that need to bless a sale.

Price also mentioned the need for government approvals.

“Anything that happens has to be signed off on by the Justice Department,” he said. It’s unclear how long that might take.

Price wouldn’t say what K&D is willing to pay for 55 Public Square, which Optima purchased for $34 million in 2008. The Cuyahoga County Fiscal Office estimates that the property is worth just over $20 million.

The complex isn’t Optima’s only Cleveland asset in financial distress.

The Westin Cleveland Downtown, a 484-room hotel at East Sixth Street and St. Clair, is the subject of a foreclosure lawsuit filed in common pleas court in October. The Cleveland International Fund, a lender based in Cleveland Heights, says that an Optima affiliate defaulted on a $36 million mortgage on the Westin last year, before the pandemic walloped the hospitality industry.

Optima has asked a judge for more time to respond to the fund’s allegations.



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