Margaritaville Owner Files For Second Bankruptcy In Bid To Hold On To Hotel
Soho Properties has filed another bankruptcy petition in an attempt to keep foreclosure at bay for the Margaritaville Resort Times Square Hotel, though it said it is close to securing funding for the property.
The company filed the petition late last week to place its fee owner entity, 560 Seventh Avenue Owner Primary, under Chapter 11 protection, PincusCo reports.
“Although the hotel is on the upswing, it still faces a multitude of defaults with its lenders, franchise holders and vendors, creating the need for a global restructuring among all stakeholders, which can best be achieved in Chapter 11,” Soho Properties Executive Vice President Sethian Pomerantz wrote in the filing, per Commercial Observer.
Last month, the LLC that owns the equity on the 36-story hotel, 560 Seventh Avenue Owner Secondary, filed for Chapter 11 bankruptcy protection. Two days later, two of its lenders, affiliates of Arden Group and Corten Real Estate, sued members of the development team, claiming they are personally responsible for the unpaid debts. The property had been facing a Uniform Commercial Code foreclosure auction after falling behind on loan repayments, but the bankruptcy filing halted proceedings.
Now, Pomerantz says the hotel is close to securing a $170M loan that would provide a financial lifeline. The capital would come from Cirrus REP Funding and would last for one year with a three-month extension option. It would be used to pay off the debt, including the hotel’s senior mortgage, according to Crain’s New York Business.
The 234-room hospitality property at 560 Seventh Ave., which has a rooftop swimming pool, two-story rooftop bar and a 16K SF Margaritaville restaurant, was developed by Sharif El-Gamal's Soho Properties in a partnership with Chip and Andrew Weiss and MHP Real Estate Services.
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 court documents filed last month. In all, the hotel has debt totaling $309M plus interest, but the interest the hotel's owners owe to Arden is disputed, Pomerantz said in the bankruptcy filing last month.
Arden and Corten claim the borrowers stopped making debt payments on the mezzanine loan in April. Further, they claim they tried to stop foreclosure through a court injunction and, when that failed, reverted to bankruptcy.
Last month, Pomerantz said Margaritaville's revenues are improving and are expected to exceed $25M by the end of next year. Hotels in the city have been performing well this year, as diminished tourist numbers in New York have steadily rebounded.
