Arbitrator Ordered Stern to Pay Silverstein $46.9 Million
A New York City arbitrator ruled that Michael Stern and JDS must pay Silverstein Capital Partners over $46 million.
Updated on Sept. 29, 2026 in Corporate Finance
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An arbitrator has ordered developer Michael Stern and his firm, JDS, to pay $46.9 million to Silverstein Capital Partners. The ruling stems from findings that Stern concealed insurance payouts and failed to account for loan funds related to the Brooklyn Tower.
Why it matters
The decision underscores the legal consequences of mismanagement regarding loan agreements and insurance proceeds in major real estate projects. It clarifies the rights of mezzanine lenders when borrowers fail to fulfill financial obligations on high-value developments.
The award includes $35.4 million in concealed insurance proceeds and $13.1 million in missing loan advances. The judgment accrues 9 percent annual interest starting from September 2024.
The players
Michael Stern
He is a real estate developer and the head of JDS Development Group.
Silverstein Capital Partners
This firm is a real estate investment and lending entity that took control of the Brooklyn Tower property.
Eugene Farber
He is the arbitrator who oversaw the dispute and issued the final award.
The details
The arbitrator found that Stern diverted insurance funds from a 2022 pipe burst and failed to account for advances intended for vendors at the Brooklyn Tower. While the arbitrator ruled in favor of Silverstein Capital Partners, they rejected the lender's request for a $12.5 million reserve fund.
Timeline
Silverstein Capital Partners provided a $240 million mezzanine loan in April 2019.
A burst water pipe damaged the Brooklyn Tower in 2022.
JDS defaulted on its project loan in 2023.
Interest on the arbitration award began accruing in September 2024.
The Brooklyn Tower project is expected to be finished by year-end 2026.
Market Landscape
This judgment highlights the intensifying oversight of project financing in the New York City real estate sector. The ruling follows the pattern set by the 2023 JDS loan default, signaling a move toward stricter lender enforcement in major construction ventures.
The ruling provides a path for Silverstein Capital Partners to finish the Brooklyn Tower project by the end of 2026. This is expected to stabilize the site for future residents and tenants in the New York City area.
The takeaway
Arbitration proceedings serve as a critical mechanism for resolving complex financial discrepancies between lenders and developers. Property investors should prioritize clear accounting of insurance proceeds and vendor payments to avoid similar legal liabilities.
Further reading
For more on how financial disputes are shaping local projects, visit Corporate Finance.
Source note: This article includes information reported by The Real Deal New York.
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