The Margaritaville Resort Times Square Hotel in New York City has recently found itself in the center of a legal dispute.
In a move over the weekend, 560 Seventh Avenue Owner Secondary LLC, which has a 100% membership interest in the hotel, submitted a petition for Chapter 11 bankruptcy. It did so in the U.S. Bankruptcy Court for the Southern District of New York to "stay a UCC foreclosure auction" of the Jimmy Buffett-themed hotel in the heart of New York City, according to the LLC’s filing.
The LLC’s move to file for bankruptcy came after it took its senior mezzanine lender, AREPIII MVTS, LLC, to state court to try to stop the foreclosure auction and was unable to do that, the bankruptcy petition said. Monday had been the target date for that bidding sale.
Media outlets have linked the lender to Arden Group. For the Margaritaville Resort Times Square Hotel, that real estate investment management company put up a senior mezzanine loan worth $57 million, according to a 2022 press release.
In the bankruptcy filing, the LLC disclosed between $100 million and $500 million in estimated liabilities on top of assets valued in the same range. It specifically mentioned two loans and a mortgage lien that collectively added up to $309 million. It has under 50 creditors.
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Sethian Pomerantz, president of the LLC and executive vice president of Margaritaville Resort Times Square Hotel developer and owner Soho Properties, said in the filing that refinancing its "existing mortgage and mezzanine debt based upon negotiated pay-offs with creditors" was the "ultimate business goal." The refinancing could be achieved "within a reasonable period of time," he argued in the filing, citing the "projections for future income, the appraised value of the Hotel, and the solid location in Times Square where tourism is reviving."
Before 2024 comes to a close, the 234-room Margaritaville Resort Times Square could bring in over $25 million in revenues provided that "various vacant retail space is leased," according to the bankruptcy petition.
The hotel experienced "operating shortfalls during its stabilization period" in 2021, something the president attributed to pandemic-related difficulties in the sector. It started welcoming guests in the summer of that year.
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The bankruptcy filing said Margaritaville Resort Times Square has a value in the $266 million to $350 million range. It will "likely" follow the LLC into Chapter 11, according to the petition.
Soho Properties CEO Sharif El-Gamal, as well as Flintlock Construction Services founders Andrew and Stephen Weiss, were hit Tuesday with a nearly $86 million legal action in connection to the loan the Margaritaville Resort Times Square Hotel owner defaulted on and the bankruptcy filing, according to Crain’s New York Business. That lawsuit reportedly came from Arden Group and Corten Real Estate Partners.
The two entities alleged El-Gamal and the Weisses should be held personally liable for the loan, per the outlet.
FOX Business reached out to Soho Properties and the Weisses for comment on Tuesday lawsuit. Arden Group and Corten Real Estate Partners declined to comment.
In a Monday statement to FOX Business, Margaritaville Chief Investment Officer Evan Laskin confirmed the foreclosure auction for the Times Square hotel, which belongs to its current owners "under a license agreement with Margaritaville," had "been delayed."
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"The bankruptcy filing will not impact resort operations, the property will remain open and staff members employed," he said.
Laskin’s statement continued that the hotel "continues to perform well, with outstanding satisfaction ratings," adding that Margaritaville "looks forward to delivering fun and escapism through the resort and restaurant experiences for guests and New Yorkers for a long time."
Times Square averages almost 360,000 pedestrian visitors on a daily basis each year, according to the Times Square Alliance. In May, it saw about 305,500 per day.
