W Union Square bankruptcy cases settled, hotel sold to new venture

LEM Mezzanine, a Philadelphia-based mezzanine lender that acquired W New York – Union Square
in a 2009 foreclosure sale, has reached an agreement to settle a
complicated series of bankruptcy cases and sell the property to a new
venture, led by Host Hotels & Resorts, according to a statement
released by LEM today.

LEM originally bought the property in a December foreclosure
auction for $2 million, plus the assumption of $212 million in debt.
The deal was the first major sale by Dubai-based Istithmar World after that country entered into a mini debt crisis the previous month.

By March, LEM threw the property in bankruptcy protection
just before senior lender DekaBank was scheduled to auction off a loan
at the property. The filing touched off a legal circus that baffled
many long-time industry observers.

The new owners will include Istithmar, the pre-foreclosure
owners, as a minority owner of the property, which will continue
operating under W Hotel Management, the Starwood Hotels & Resorts
Worldwide affiliate.

Host, a Bethesda, Md.-based real estate investment trust, owns 109
hotels, or 60,000 rooms globally and owns a stake in a joint venture
that owns 11 hotels in Europe, with 3,500 rooms. The firm owns
properties under various brands, including Four Seasons, Ritz-Carlton,
Westin, Hilton and Marriott.

As part of the agreement, the first mezzanine loan held by DekaBank
will be repaid and LEM will receive current and future payments to
repay its original mezzanine loan.

Details about the deal, expected to close no later than Sept. 15, 2010, were not disclosed.

Host officials were not immediately available for comment.