The owners of the Flatiron Hotel claim that Berkley Acquisitions, which sued them for allegedly backing out of a $30.2 million deal reached in April to sell the property, failed to make an escrow deposit, and then brought in third-party buyers to look at the hotel without permission, according to court documents filed Monday.
Berkley, led by investor and apparel executive Eli Braha, originally filed the breach of contract suit Aug. 16 in New York state Supreme Court alleging the owners, headed by investor John Mei, backed out of a deal to sell the 9 West 26th Street hotel to the investment firm. Lawyers for the ownership claim that Berkley didn’t make a required $1 million deposit into an escrow fund within seven business days of the initial agreement, and put the property up for sale just days after signing the letter of intent April 15 of this year. They asked the court to dismiss the suit.
“A superintendent at the hotel property informed the management of defendant that plaintiff kept calling the hotel for appointment to bring its prospective buyers to view the hotel property for a possible sale to them,” said attorney Xiang Xie, who represents the owners in the case.
In court filings, Xie pointed out that both The Real Deal and Madison Park News published stories on April 25 stating that the Berkley was marketing the hotel for sale. Xie states that the owners gave Berkley additional time to pay the deposit, but he never did.
By June 20, the owners entered a deal with Smart Apartments, a firm led by controversial hotel investor Robert “Toshi” Chan for a five-year lease agreement for the hotel, with an option to either renew the lease for another five years or buy the property, court records show. The property, which is facing a foreclosure suit by senior lenders, now operates as the Flatiron Hotel Toshi. Toshi has been a controversial investor for years in New York, as he has marketed extended-stay apartments for years under the radar of city regulators. Legislation that recently went into effect would crack down on the illegal practice, which led Toshi into seeking new deals of providing legitimate accommodations to business travelers and tourists.
Braha was not immediately available for comment, but attorney Mark Kook, representing Braha’s firm said, “I believe they made a motion and we’ll respond in due court.”
As The Real Deal previously reported, a June 20 lease agreement was filed with the New York City Department of Finance.
Lawyers for Chan also filed a motion Oct. 20 seeking to be added as a defendant in the Berkley suit. They claim that if Berkley is granted ownership of the property, it would put their lease agreement with Mei’s group in jeopardy.
“He’s pleased with the progress in the case and looks forward to seeing the outcome,” a spokesperson for Chan said.