Trihop Carmine, a special-purpose real estate entity that inked a 49-year lease for a West Village retail space in 2012 — and then subleased it to an International House of Pancakes franchisee — made an unexpected move last week, filing for bankruptcy protection so that it would not lose the lease valued at $1 million.
Even more surprising, the next day, the company’s attorney filed a motion to withdraw the Chapter 11 application, leading one attorney with knowledge of the case to quip that it might be the shortest bankruptcy ever in New York.
Indeed, several real estate attorneys said seeking Chapter 11 protection is an unusually aggressive action for what appears to be a typical lease dispute. “[Bankruptcy] is generally resorted to as a last ditch effort when all others fail, and sometimes utilized by a party to buy some time from the impact of an impending judgment,” Terrence Oved, a partner with the law firm Oved & Oved, said. He is not involved with the case.
So why did Trihop Carmine, which is controlled by IHOP operator Ed Scannapieco, file for Chapter 11 protection — an unusual move to begin with — then withdraw the request?
Sources noted that the company is caught in the middle of a complex tussle between two larger real estate firms with a stake in the IHOP location, a commercial condominium at 80 Carmine, at Varick Street.
The tempest in an IHOP coffee cup is between Allen Rosenberg’s Alrose Group, which owns a controlling position in the condo, and an affiliate of the retail-focused landlord Ashkenazy Acquisition, which owns a 25 percent stake, sources told The Real Deal. In addition, Ashkenazy owns IHOP franchise rights in the tri-state area; and an affiliate operates the IHOP in the condo, through the sublease from Trihop Carmine.
Given that set up, Trihop Carmine management initially filed for bankruptcy to protect its interests in 80 Carmine while the two larger firms maneuver — then decided such an act might actually inflame the situation, insiders said. That led to the second filing with the court, which stated that the request for bankruptcy protection was “an error.”
One thing is for certain: the tangle over 80 Carmine is a difficult one to fully decipher. Alrose — without Ashkenazy — bought the commercial condo in the building for $6.9 million in 2007 and leased a portion of it to a retail tenant. About 3,500 square feet on the ground floor as well as basement and outdoor space, remained vacant, however.
In December 2010, Ashkenazy inked the franchise agreement with IHOP. Then in May 2012, Ashkenazy affiliates executed a complex deal at 80 Carmine. It acquired a 25 percent stake in the condo, and at the same time the entity Trihop Carmine was created, which subleased to an operating entity that is owned by an affiliate of Ashkenazy.
During and after the substantial build-out phase to prepare the space for a restaurant, the site was hit with city Department of Buildings violations, a mechanic’s lien and ultimately a lawsuit from residents of the same condo building over mechanical equipment on the roof.
In the midst of that morass, sources claim Alrose stopped paying a share of the profits from the condo to Ashkenazy, and in turn, the Ashkenazy affiliate stopped paying rent, which squeezed Trihop Carmine, that is supposed to pay Alrose the rent. That led to Alrose filing suit in Landlord & Tenant Court, to recover unpaid rent.
Last week, Rosenberg denied the Ashkenazy entity had a stake in the property. Ashkenazy and the corporate offices of IHOP declined to comment.
Trihop Carmine filed for bankruptcy, among other reasons, to give it time to settle the more than $200,000 in back rent it owes on the space, according to court papers. The firm then reversed course after the filing became public.
Whatever the reason, the move has left some legal experts puzzled. “People tend to play the voluntary bankruptcy card only as a last resort, with a lot of planning and forethought or in an emergency, as when the sheriff is at the door.,” said Henry Bergman, an attorney with the law firm Moses & Singer. Furthermore, he added, “it is unusual that someone would try to unfile a voluntary petition a day later.”