The Time Hotel, the boutique Theater District celebrity haunt from Dream hotelier Vikram Chatwal, is facing a foreclosure suit from special loan servicer LNR Partners, after the owners allegedly defaulted on $55 million in notes.
The July 13 suit, filed in Manhattan Supreme Court, alleges that the owners, Lichtenstein-based Marko Trust and New York-based Hampshire Hotels, failed to make a $619,000 interest payment in January of this year, and all payments since. The suit also asks for a court-appointed receiver.
Hampshire Hotels officials told The Real Deal that a forbearance agreement with the Miami Beach-based special servicer ran out several months ago and that LNR is now playing hardball. “Were still trying to work with them to try and come up with a solution,” said Jay Stein, chief operating officer of Hampshire Hotels, which owns the ground lease at the property.
The 192-room property, located at 224 West 49th Street, has grown to become one of the top celebrity hotspots since opening in 1999.
Chatwal, 40, a graduate of the University of Pennsylvania’s Wharton School, counts a host of celebrities — Naomi Campbell and Kate Moss, among them — as friends. His father, Sant Singh Chatwal, is the owner of the Hampshire Hotels chain.
According to the suit, the owners took out a $43.1 million mortgage loan from Lehman Brothers in 2005 and an $11.9 million gap mortgage loan, which were combined into a $55 million loan. The loan was securitized, or bundled with a group of other loans, with LaSalle National Bank (which was later acquired by Bank of America) serving as trustee of the loans. The borrowers originally defaulted on the loans in November 2009, and got a two-year forbearance. The loan was sold to LNR in May.
Stein told The Real Deal that the Manhattan hotel market has recovered, but is still weaker than it was in 2009. The hotel is also facing cost pressures after becoming a unionized shop, and is facing increased pressure on rates from rivals, such as the W NY Times Square, as the amount of Midtown inventory has increased. Stein said the rival hotel has offered weekend rates as low as $169 per night.
Another hotel in the family portfolio, the 220-room Dream at 210 West 55th Street, has also been in trouble with a $100 million in loans placed with a special servicer in 2009, and the debt has been up for sale through Manhattan-based Mission Capital.
“There’s obviously a lot of interest because hospitality is hot,” said William David Tobin, principal at Mission Capital, adding that a couple of offers have been made for the property that now houses Dream. “Anytime somebody can buy a note to do a restructuring or get to the collateral, that draws a lot of investor interest.”
The average price for hotel deals in Manhattan has been $479,000 per key [room] over the past year, and Tobin confirmed that $500,000 per key is the range they are valuing the property. It is unclear how much of a discount the loan would be sold for.