The Real Deal New York

Berkley alleges Flatiron Hotel owners reneged on purchase

August 26, 2011 06:31PM
By David Jones

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From left: Eli Braha of Berkley, Ariel Brenner of Corcoran, Debra LaChance of Corcoran, Eric Roth of Brick Realty, Robert Toshi Chan and the Flatiron Hotel

Berkley Acquisitions, led by investor and apparel executive Eli Braha, filed a $30 million lawsuit against the owners of the Flatiron Hotel, alleging they reneged on a deal to sell the troubled property to them.

The Aug. 16 lawsuit, filed in New York state Supreme Court, alleges the owners — led by investor John Mei — committed fraud, fraudulent misrepresentation and fraudulent concealment and seeks to force them to perform on the sales agreement.

The lawsuit alleges that Berkley entered negotiations with Ariel Brenner, an agent and senior associate at the Corcoran Group, in February 2011, and spent two months negotiating a deal to buy the hotel, located at 1141 Broadway.
Berkley attorneys said the firm submitted an offer in April 2011 to buy the property for $30.2 million in cash, which was signed by Mei, a managing member of Main Team Hotel, the leading firm behind the owners of the property.
Lawyers for 1141 Broadway were not immediately available for comment.

Berkley officials say they deposited $1 million into an escrow account, but Mei, in an April 28 letter, allegedly terminated the agreement. Braha, according to the complaint, sent a letter to Berkley on April 29, complaining of the termination and claimed that the owners violated the letter of intent.

According to a published report in Madison Park News, on April 28, the property was being marketed for sale by Berkley Acquisitions.

Berkley says, in the complaint, that the owners of the Flatiron Hotel failed to submit a final purchase agreement and withdrew the offer and then proceeded to do everything they could to block the deal from going through. The lawsuit claims that Debra LaChance, a senior vice president and associate broker at Corcoran, sent a May 18 letter stating they had another offer for the property.

Berkley officials did not return calls seeking comment and Corcoran declined to comment on behalf of the two agents.
By July, The Real Deal reported that controversial investor Robert Toshi Chan, who operated a number of illegal extended-stay apartment buildings, was in talks with Berkeley to negotiate an acquisition of the property.

Sources told The Real Deal at the time that there was a problem obtaining a clear title for the property, and sources have since stated that Toshi was negotiating a deal that would involve a triple-net-lease for the property that could lead to ownership. Records filed with the city’s Department of Finance show a June 20 lease agreement between 1141 Realty, the business name of the ownership group, with Smart Apartments, a firm controlled by Chan.

Chan was out of town and not immediately available for comment, but a spokesperson was trying to get in touch with him at press time.

The hotel ownership, which included an investor named Ibrahim Saleh, is facing several million dollars in lawsuits for alleged failure to pay contractors and other issues. Saleh, according to at least one lawsuit, had fled the jurisdiction and possibly the country, so he wasn’t immediately reachable for comment.
The hotel’s lender, First Central Savings Bank, later filed suit to foreclose on $8 million in mortgage loans.

The bank earlier this month sold the defaulted debt to Manhattan-based Brick Realty Capital, led by managing partner Eric Roth. Officials at Brick were not immediately available for comment.

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