Par Funding’s Philly properties were sold to pay Ponzi victims — but for less than they cost

The money was supposed to be lent to small businesses, which would pay it back at high interest rates, enriching investors who funded the loans.

Instead, insiders at Par Funding, a Philadelphia lender recently declared a Ponzi scheme four years after the Securities & Exchange Commission (SEC) accused its founders of fraud, pumped tens of millions of investors’ dollars into private real estate speculations, much of it in Philly’s hottest neighborhoods.

In the ensuing court-approved sales of that real estate, 17 Par-related Philly properties sold since the start of 2023 fetched an average of 15% below the prices Par associates paid for them in 2016-2019. A smaller group of resort and suburban properties were sold at prices far above Par’s cost.

Lower sales prices can mean less money for victims of the scheme. While real estate veterans note prices may be lower in court-ordered sales, Par real estate outside the city gained value.

The SEC shut Par down in July 2020 after the company stopped paying investors. Court-appointed receiver Ryan Stumphauzer then began seizing cash, a jet, boats, cars, paintings, jewelry, and real estate to repay investors.

In the most successful of these asset sales, the receiver more than doubled the $5.8 million Par founders Joseph LaForte and his wife, Lisa McElhone, paid in 2019 to a group headed by Brook Lenfest, son of the late Inquirer owner Gerry Lenfest, for a waterfront mansion in Jupiter, Fla. The receiver took over the estate in 2020 and last year agreed to a buyer’s offer for $12 million, though the final sale has been held up over a tax lien.

Stumphauzer’s team also reported profits on the sales of other Par-related properties at the Jersey Shore and in the Poconos. The LaForte-McElhone home at 568 Ferndale Lane, Haverford, built in 2016, cost $2.45 million; the receiver sold it last summer for $3.34 million. The three resort properties, purchased by Par-related parties in 2017-2020 for a total of $8 million, were sold by the receiver for a total of $11.5 million.

But in Philadelphia, the receiver sold small apartment buildings in trendy neighborhoods such as Old City, Northern Liberties, Fishtown, Bella Vista, Spring Garden, and even Rittenhouse Square for less than Par people paid for them in 2016-2019.

Not all the city properties lost value. Residential units in buildings on North 25th Street near Brewerytown, a three-unit building in the Graduate Hospital area, and a four-unit in West Philly’s Walnut Hill were sold for gains, records show.

In total, however, the 17 city properties (including more than 100 units, mostly apartments, with some commercial storefronts) that cost $36 million when they were purchased by Par insiders in 2016-2019 have sold since early last year for $30.5 million.

Stumphauzer and lawyers for his office warned in court hearings and filings seeking sale approvals that several factors could cut into Philadelphia property sales proceeds:

Among the fallen values recorded in the Par litigation: A 13-unit apartment building at 300 Market St. that cost Par affiliates $4.4 million in 2017 fetched $3.25 million — the best of five offers, according to the receiver — when it was sold in May.

An 18-unit building at 135-27 N. Third St., close to Par Funding’s former offices, cost Par associates $6.6 million in 2019; the receiver got $5.6 million for it. That’s less than the $6.7 million appraisal the receiver ordered last summer and also below a $6 million second appraisal.

Most of the sales were also below early valuation estimates that Ori Feibush, the South Philadelphia-based real estate developer who managed most of the properties during the Par Funding years, provided to the receiver after Stumphauzer took over the real estate and before interest rates rose.

Ironically, Par founder Joseph LaForte was so concerned the receiver’s professionals would undervalue the property — potentially forcing him to pay more from other assets — that prosecutors say he threatened Feibush. Feibush agreed to review the valuations and bumped up his estimates for the entire Philadelphia portfolio (including a few homes that have not yet sold) to $44 million from his initial $42 million. A lawyer for LaForte acknowledged there had been an argument but denied threats.

LaForte, and his brother James, who has been identified by federal prosecutors in Brooklyn as a member of the Gambino crime organization and charged with a brutal attack on a Philadelphia lawyer working for Stumphauzer, have since been criminally charged with running Par as a racketeering conspiracy. Both are in federal prison awaiting trial this fall.

It’s not unusual in a complex, court-ordered process for sales to come in lower than hoped for, said Stephen F. Blau, a commercial real estate broker who has served as a receiver appointed to sell off banks’ property portfolios in New Jersey and Pennsylvania.

“The fact they may have been appraised for more than $36 million and then sold for $30 million is not an unreasonable deviation. I doubt the judge would be terrifically upset,” Blau said.

While investors may prefer to wait through a slow period until more buyers bid prices back up, receivers charged with raising cash for investors and other creditors (who in Par’s case have already waited four years to get paid) may not have that luxury.

“When you’re a receiver, you’re there to dispose of the asset,” Blau said. “You have to do what’s in the best interest of the parties, subject to the [court] order that appointed that receiver. You try to maximize value. But you can’t allow the property to go to waste.”

Staff writer Michaelle Bond contributed to this article.