Lenders Sue Margaritaville Times Square Owners For $85M After Bankruptcy Filing
No one has to search for salt in the legal battle over the future of the Margaritaville Resort Times Square.
Days after the owners of the 36-story hotel filed for bankruptcy to avoid a foreclosure sale, two of its lenders sued members of the development team claiming they are personally responsible for the unpaid debts.
The LLC that owns the equity on the property, 560 Seventh Avenue Owner Secondary, filed for Chapter 11 bankruptcy protection Sunday night. The property was facing a UCC foreclosure auction the next day after falling behind on loan repayments, which the bankruptcy filing halted.
But in a new suit filed Tuesday in New York State Supreme Court, affiliates of lenders Arden Group and Corten Real Estate claim developers Sharif El-Gamal, who heads Soho Properties, Stephen Weiss and Andrew Weiss are now personally responsible for the full amount of the loan as a result of the bankruptcy. In its filing, Arden claims it is due more than $85M, plus legal fees.
Arden provided the hotel developers with a $57M mezzanine loan in 2021, and last year Corten bought 50% of the interest in the loan, according to the court documents. In all, the hotel has debt totaling $309M plus interest, but the interest the hotel's owners owe to Arden is "disputed,” Soho Properties Executive Vice President Sethian Pomerantz said in Sunday’s bankruptcy filing.
The suit claims the borrowers stopped making debt payments on the mezzanine loan in April. When the foreclosure auction was scheduled, the court document reads, the borrowers “rushed into court” to try to keep the sale from happening with a court injunction. When that injunction was denied on Friday, the borrowers subsequently filed for Chapter 11 bankruptcy Sunday evening.
The hotel also is saddled with a $167M senior mortgage issued by an affiliate of One William Street Capital Management, as well as an $85M junior mezzanine loan from Global One Asset Management, a South Korean private equity firm, according to the filing.
The 234-room hospitality property at 560 Seventh Ave., which has a rooftop swimming pool, a two-story rooftop bar and a 16K SF Margaritaville restaurant, opened in 2021 — a difficult time for the city’s hospitality industry.
Pomerantz wrote that Margaritaville's revenues are improving and are expected to exceed $25M by the end of 2024. Soho Properties didn't respond to a request for comment by press time, and Arden and Corten’s attorney declined to comment.
