Margaritaville Times Square Owners Hope Bankruptcy Helps Them Hang On
The owner of the Margaritaville Resort Times Square has filed for bankruptcy to stave off a foreclosure auction for the 2-year-old Jimmy Buffett-themed hotel.
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.
The LLC that owns the equity on the 36-story hotel, 560 Seventh Avenue Owner Secondary, filed for Chapter 11 bankruptcy protection Sunday night, Bloomberg first reported. The petition, filed in the U.S. District Court for the Southern District of New York, was signed by Soho Properties Executive Vice President Sethian Pomerantz, who wrote in the filing that he serves as president of the LLC.
Arden Group, the mezzanine lender on the hotel, initiated a UCC foreclosure on the property in May, scheduling an auction for July 10. Arden lent the hotel's owners $57M in November 2021, which refinanced their construction debt. Soho defaulted on its payments to Arden in March.
The bankruptcy filing precludes the foreclosure auction, giving the owners a chance to try to restructure the debt on the property and retain control.
"The Debtor is seeking immediate Chapter 11 relief because the Hotel will be forfeited by an auction sale, and the opportunity to pay creditors will be lost," Pomerantz wrote in the bankruptcy declaration. "Given the projections for future income, the appraised value of the Hotel, and the solid location in Times Square where tourism is reviving, the Debtor believes that a refinancing of the Hotel can ultimately be achieved within a reasonable period of time."
Margaritaville Chief Investment Officer Evan Laskin told Bloomberg that the proceedings won't impact the hotel operations.
“The property will remain open and staff members employed,” he wrote in a statement, adding the company “looks forward to delivering fun and escapism through the resort and restaurant experiences for guests and New Yorkers for a long time.”
The hotel has debt totaling $309M plus interest, but the interest the hotel's owners owe to Arden is "disputed," Pomerantz wrote. 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.
Pomerantz wrote that the hotel's opening coinciding with the pandemic caused its financial troubles. But he said that its revenues are improving and are expected to exceed $25M by the end of 2024. The owners also are optimistic that they will be able to secure more tenants for the 34K SF of retail space in the property.
The pandemic caused significant financial pain to many of the city’s hotels. The Williamsburg Hotel filed for bankruptcy and was eventually sold to UK-based Quadrum Global for $96M. The Blue Moon Hotel on the Lower East Side filed for bankruptcy last year. Last week, the owner of the Mondrian Park Avenue hotel turned over the keys to Global Holdings Group two years after Eyal Ofer's firm bought the debt on the property.
