Michael Shah sells RH Guesthouse for $58M 

Michael Shah sold the RH Guesthouse in the Meatpacking District in an attempt to stave off default in the Israeli bond market, getting a fraction of what he wanted.

Delshah Capital sold the hospitality property at 55 Gansevoort Street for $57.7 million, Crain’s reported. The buyer was RH — formerly known as Restoration Hardware — which has been operating the property since 2017 and is locked into a 15-year lease.

Several weeks ago, Shah avoided defaulting on approximately $59 million in Israeli bonds, but only barely. Delshah negotiated a maturity extension pushing the bonds’ due date to the end of the year, so it had to solve its debt problem quickly.

One solution was to recapitalize RH Guesthouse. Shah began marketing the 10-room hotel property for sale last summer, seeking $72 million for it. Instead, Shah accepted an offer for 20 percent less. He had taken control of the property in 2012 for $22 million. RH signed a triple-net lease and as part of that deal they invested $55 million into renovations, with Delshah Capital contributing approximately another $7 million, according to a source close to the deal.

RH Guesthouse, which opened last year, is known for its limited rooms, lavish amenities and rates starting at $2,200 a night. Each room has a stocked pantry and its own gym. Guests are prohibited from posting pictures on social media and can’t bring children or pets. There’s also a restaurant, caviar bar and rooftop pool for guests. 

What happens next for Delshah is unclear. The company did not return a request for comment from Crain’s.

Delshah put its ownership entity, 100 Christopher Street Propco LLC, for the property into bankruptcy in late September, which temporarily blocked the bondholders’ trustee from taking control of Delshah Capital Limited, which owned both 55 Gansevoort and 100 Christopher Street. 

The firm went into contract in August to sell the latter to Lions Group for $30 million, planning on using the proceeds to pay bondholders and use bankruptcy as a means to accelerate the deal, but that sale was only expected to cover half of what’s owed.

— Holden Walter-Warner

Correction: An earlier version of this story misstated the amount Delshah Capital spent on renovations to RH Guesthouse and omitted RH’s expenditure for that work.

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