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n February 2022, Shaya Prager purchased a four-story townhome at 311 East 51st Street in Midtown East for $4.5 million. Prager has gained notoriety for using an ownership structure involving ground leases to secure loans worth more than the value of his real estate purchases. He and partners borrowed over $3 billion, according to loan documents reviewed by The Real Deal.
Prager's investment strategy is diverse, extending beyond office parks in suburbs like Florham Park, New Jersey, and Bloomington, Minnesota. In addition to real estate, he has dabbled in the medical waste business and Covid mask trade. Prager's properties are now facing foreclosures, with two lenders filing lawsuits against him over the ground lease structure.
The day Prager bought the Midtown townhome, a rental property, he secured a $1.6 million loan from Mark Nussbaum, an embattled real estate attorney. Two months later, Prager flipped the property to Katherine Cartagena for $6 million, a 33% increase in price. Cartagena, a novice investor, is Prager's go-to deal partner.
Cartagena secured a $3.15 million loan from Cross County Savings Bank to close on the deal. The transaction involved Riverside Abstract as the title company. Prager claimed the property was vacant at the time of his purchase and made significant improvements to increase its value. City building records do not list any permitted work during Prager's two-month ownership.
The Department of Justice and Federal Housing Finance Agency are scrutinizing flips or quick sales between related parties, a common scheme involving purchasing a property and selling it to a straw buyer at a higher price. The goal is often to buy real estate with no equity. In one instance, Riverside Abstract provided the closings for a fake flip of an office complex in Troy, Michigan.
Cartagena has faced issues operating and managing properties. The New York City Mayor's Office of Special Enforcement alleged she illegally converted 311 East 51st Street to short-term rentals. Cartagena settled with the city and agreed to pay a fine of $845,000.
Prager's favored partners, Shimon Katz and Cartagena, acquired a rental property in Murray Hill at 111 East 38th Street for $10.3 million. Prager denied any involvement in the property. Cartagena secured an $8 million mortgage from a mysterious entity with ties to Riverside Abstract. She later refinanced the loan through Greystone, which assigned it to Fannie Mae.
The players involved have been tied to transactions where mortgages were obtained for amounts equal to or larger than what the property sold for. The quick Fannie loan allowed Cartagena to own the property with no equity in just three months.
