Fortis Property Group Lawsuits: Fraud, Foreclosures, and Defaults

Fortis Property Group, the Brooklyn-based developer run by Louis and Joel Kestenbaum, is a defendant or plaintiff in a string of lawsuits tied to troubled projects in New York, Boston, and Dallas. The active Fortis Property Group lawsuits include an $11 million investor fraud claim at the Olympia Dumbo condo tower, an $83 million lender action after the foreclosure of One Lincoln Street in Boston, a completed foreclosure judgment on the stalled 161 Maiden Lane project, and a contract dispute with SUNY over the former Long Island College Hospital site. Older cases, including a construction-defect suit at Bayard Views in Williamsburg, have already been dismissed.

Olympia Dumbo Investor Fraud Suit

The most recent case was filed on February 26, 2025, when an LLC connected to the Hakimian Organization sued Fortis for fraud and gross mismanagement at Olympia Dumbo, a 33-story, 76-unit luxury condominium at 30 Front Street in Brooklyn. The suit seeks $11 million in damages and names former CEO Jonathan Landau, current CEO Joel Kestenbaum, and COO Terrence Storey.¹

According to the complaint, Fortis executives told the investor in 2019 that an attached commercial garage and community center was worth $122 million, a valuation that helped secure $5.5 million across two investments. The plaintiff says it learned in January 2025 that Fortis was trying to sell the same space for $26 million, and alleges Storey acknowledged the original number was “problematic and unrealistic.”¹

The complaint also alleges Fortis concealed a November 2023 default on a $284 million G4 Capital loan until May 2024, failed to meet a roughly $350,000 capital call in 2022, and pulled $10 million from the project through inflated management and development fees. Condo units presented as complete were described as “unfinished, uninhabitable, and filthy.”²¹

A Fortis spokesperson called the complaint “pathetic” and the accusations “baseless and false,” and said the firm “looks forward to achieving a complete vindication in court.”¹

One Lincoln Street Lender Suits in Boston

Fortis lost its Boston office tower, One Lincoln Street, in a March 2025 foreclosure auction after defaulting on a $763 million senior loan held by BDT & MSD Partners and a $145 million mezzanine loan from DivcoWest. The lenders took the building back with a $400 million bid. Anchor tenant State Street had departed in 2023, and the tower was reported to be less than half occupied.³

Following the auction, both lender groups sued Fortis and Joel Kestenbaum personally to collect a combined $83 million in unpaid debt and interest. DivcoWest is seeking $47 million; BDT & MSD is seeking $36 million. The complaints point to an “irrevocable, absolute, continuing guaranty of prompt payment and performance” signed at loan origination, and to Fortis’s failure to make monthly debt service payments due at the January 2, 2025, maturity date.³

Fortis sued the lenders first, in March 2025, alleging they violated the loan agreement and breached a “good faith” arrangement over control of the tower. A Fortis representative called the lenders’ suits a “defensive, flailing ploy.” All three cases remained active as of mid-2025 with no reported rulings.³

161 Maiden Lane Foreclosure and Bank Leumi Suit

Fortis bought 161 Maiden Lane in Manhattan’s Financial District in 2013 for $64 million, planning an 80-unit luxury condo tower. The project stalled through construction delays, a worker fatality, a 2020 walkoff by workers who had reportedly gone months without pay, and a visible lean of several inches to the north. That lean produced separate litigation between Fortis and construction manager Pizzarotti over who was responsible.⁴

By 2023 the building had been unfinished and exposed to the elements for over three years, with an engineer hired by Fortis estimating $106 million to complete it. In November 2023, Judge Barry Ostrager granted Valley Bank’s motion for summary judgment, allowing foreclosure to proceed on a $120 million loan (of which $90 million had been funded). A referee was to be appointed to determine the total debt owed and whether the site should be sold as a single parcel. Fortis’s separate breach-of-contract and fraud suit against Valley Bank did not block the foreclosure but was left open for possible damages. Fortis said it was “evaluating all options,” including appeal.⁴

Earlier, in August 2020, Fortis had sued Bank Leumi USA and Bank Leumi le-Israel over their alleged failure to fund a construction loan for the same site, claiming fraud and breach of contract. The lenders moved to dismiss on waiver and jurisdictional grounds. In March 2021 the New York State Supreme Court’s Commercial Division rejected those arguments and allowed Fortis’s claims to move into discovery.³

SUNY Suit Over the Former Long Island College Hospital Site

Fortis bought the former Long Island College Hospital campus in Cobble Hill, Brooklyn from SUNY Downstate in 2014 for $240 million, structuring the sale through multiple closings and including a provision for NYU Langone to build a medical facility on part of the site. Fortis rebranded the project “River Park.”⁵

The final closing failed twice in 2023. SUNY terminated the deal and sued to enforce an $8 million guarantee Fortis had posted, and to keep a $7 million deposit. Fortis argued SUNY had not met the closing conditions, citing NYU’s alleged nine-year delay in finishing the medical facility rather than the two years expected, during which Fortis said it had spent tens of millions on operating costs for a vacated site.⁵

In April 2024, Justice Richard Platkin of the New York Supreme Court in Albany County dismissed Fortis’s counterclaims for breach of contract and fraud, holding they were barred by merger and disclaimer clauses in the purchase agreement and a 2015 waiver. Alleged oral promises of expense credits were found to be superseded by the written contracts. Fortis was allowed to amend its answer to argue that the $8 million guarantee never took effect because it lacked required state Attorney General and Comptroller approvals; SUNY then produced documentation showing those approvals had been obtained. The core dispute over the guarantee remained before the court on summary judgment.⁶

Madison Realty Foreclosure at River Park

Before SUNY sued, Fortis had already lost control of two River Park parcels. Madison Realty Capital, which had extended a $107 million bridge loan and a $297 million construction loan on the project, launched a UCC foreclosure on Fortis’s equity interests at 350 Hicks Street and 91-95 Pacific Street in September 2022, seeking $47.7 million in unpaid debt.⁷

The auction was pushed back while the parties negotiated, and in October 2022 Fortis sold the two sites to Madison Realty, avoiding a full foreclosure. The parcels had been slated for two condo buildings totaling 150 units. A third building, 5 River Park at 347 Henry Street, was excluded from the proceedings because it was already about 75 percent sold. Why Fortis defaulted on the Madison debt was never publicly explained.⁷⁸

Colonnade Office Campus Default in Dallas

In Addison, Texas, Fortis owns the Colonnade, an office campus of roughly 1.1 million square feet at 15303 Dallas Parkway. A $223 million loan originated by UBS AG in 2019 was transferred to special servicing in September 2023 after Fortis defaulted on $17 million in mezzanine debt. Fortis told servicers it could not cover debt service because of rising lease costs and declining occupancy.⁹

The loan matured in early 2024, by which time the property was reportedly worth less than the $223 million debt. Fortis asked for a three-month deferral and was preparing a loan modification request, but as of early 2024 the loan remained in default.¹⁰

Bayard Views Construction Defect Suit (Dismissed)

An older case has already been resolved in Fortis’s favor. In 2014, the condo board of Bayard Views at 20 Bayard Street in Williamsburg sued Fortis for roughly $2 million in construction defects, including frequent flooding, faulty wiring, inadequate HVAC, and cracks in the building’s facade. The board alleged Fortis knowingly sold defective units and made false representations in sales contracts.¹¹

Fortis had acquired 37 unsold units in the 62-unit building in 2011 from original developer Isaac Hager, who had filed for Chapter 11 bankruptcy. In April 2017, Brooklyn Judge Lawrence Knipel ruled that Fortis could not be held liable for defects that predated its purchase. Claims against Joel Kestenbaum and Jonathan Landau personally were initially allowed to continue, but the Appellate Division later reversed that too, and the case was dismissed in full.¹²

Who Runs Fortis and Who Is Named in the Suits

Fortis Property Group was founded in 2005 by Louis Kestenbaum, who serves as chairman, and his son Joel Kestenbaum, who currently serves as CEO. The firm has developed residential and commercial properties primarily in Brooklyn but also in Boston, Dallas, and Norfolk, Connecticut.¹³

In December 2022, the company restructured. Jonathan Landau, CEO for nearly two decades, stepped down; Joel Kestenbaum took over as CEO; and Terrence Storey, previously CFO, moved into a combined COO and Chief Investment Officer role. A new CFO and general counsel were also brought on.¹⁴ Landau went on to launch Landau Properties, and said the difficulties at Fortis projects were not “the driving factor” in his departure.¹⁵ He remains a named defendant in the 2025 Olympia Dumbo fraud suit for conduct that allegedly occurred during his tenure.¹

1
The Real Deal. Investor Accuses Fortis of Fraud at Olympia Dumbo
2
Brooklyn Eagle. Dumbo’s Olympia Developer Accused of Fraud by Investors
3
The Real Deal. One Lincoln Street Lenders Sue Fortis, Kestenbaum
4
The Real Deal. Valley Bank Can Proceed With Fortis Project Foreclosure
5
The Real Deal. Fortis Sued by SUNY at Former Cobble Hill Hospital Site
6
FindLaw. Downstate at LICH Holding Co. v. Fortis Property Group
7
The Real Deal. Fortis Sells Large Cobble Hill Site to Madison Realty After Foreclosure Threat
8
Brooklyn Eagle. At Former LICH Site, Developer Runs Into Financial Trouble
9
The Real Deal. Fortis CMBS Loan for Colonnade Sent to Special Servicing
10
Dallas Business Journal. Colonnade Office Loan Payoff Default Fortis
11
The Real Deal. Fortis Not Responsible for Defects Caused by Prior Developer, Judge Rules
12
Habitat Magazine. Condo Defects
13
The Real Deal. The Kestenbaums
14
Fortis Property Group. Fortis Property Group Corporate Restructuring Announcement
15
Bisnow. Jonathan Landau, Former Fortis CEO, Launches Landau Properties