A German bank claims the developers of the year-old, sleek, 21-story Cooper Square Hotel in the East Village are in default on $52 million in loans, at the same time the building owes millions to contractors.
Not only is the project in financial distress, but developers and investors in the 145-room hotel at 25 Cooper Square at East 5th Street could owe as much as $6 million in personal guarantees, the recent lawsuit says.
Commercial lender WestLB filed to foreclose on $52 million in loans given to Cooper Square Hotel, Cooper Square Mezz Lender and seven individuals including the hotel’s co-developer Matthew Moss and real estate investor Kyle Ransford, a lawsuit filed Dec. 14 in New York State Supreme Court says.
In addition, at least 20 contractors have filed mechanic’s liens totaling $9.9 million on the project between June 2009 and Dec. 18, records from the New York County Clerk show. The largest single lien, for $5.8 million, was filed by contractor F.J. Sciame Construction on Aug. 21, the records show.
Moss, Ransford and investor Gregory Peck are in default on a completion guarantee, and collectively owe up to $6 million, in part because of the unpaid liens, the suit says.
The unusually shaped hotel was built around a tenement building at 27 Cooper Square, whose owners refused to sell, and the hotel’s December 2008 opening was closely watched. Since its inception, the outdoor bar has drawn some neighborhood complaints over noise and other quality of life issues.
In a statement to The Real Deal, the hotel owners said the lawsuit was a formality toward a debt restructure.
“Cooper Square Hotel has been diligently, and in an amicable manner, working with the banks to restructure its debt and is continuing to do so. The foreclosure proceeding is simply a measure needed to restructure that debt. The hotel continues to successfully operate,” Cooper Square Hotel said in an e-mailed statement.
The hotel is charging as low as $225 per night, according to its Web site, below its initial teaser rate of $275 a year ago.
Debt restructurings on the heels of lawsuits have become more common in the downturn, with some eye-popping results, such as the 60 percent cut to loans at the former New York Times Building at 229 West 43rd Street in Times Square.
Investor Ransford has been named in at least three foreclosure lawsuits in New York City, seeking personal guarantees on properties he was developing or investing in.
Neither Ransford nor the bank immediately responded to requests for comment.