$62M loan at UES Marriott in default

TRD New York /
Nov.November 05, 2009 05:58 PM
Marriott at 410 East 92nd Street is owned by an affiliate of Robert Gladstone’s Madison Equities (Gladstone photo source: GreenPearl)

An Upper East Side Marriott Courtyard hotel that is losing money fast is subject to its second lawsuit in less than two months.

Just eight weeks after the owner of the Marriott Courtyard New York Manhattan/Upper East Side hotel sued the hotel’s management for allegedly making secret deals that hurt the bottom line, the lender on the property has sued the owner to foreclose on a $62 million mortgage at the building.

The pair of lawsuits highlights the difficulties facing commercial building owners and borrowers in the weak economy, said Harvey Krasner, a real estate partner at Warshaw Burstein Cohen Schlesinger & Kuh, who was not involved in the litigation.

Note: Correction appended.

“Rents are lower and not higher, and banks are lending less and appraising lower. These properties all have too much [debt],” he said, speaking generally about properties financed in recent years.

The hotel owner, Madison 92nd Street Associates, an affiliate of developer Madison Equities, opened the 226-room hotel at 410 East 92nd Street between First and York avenues in August 2006.

The hotel is located in a commercial condominium in the building, covering parts of the first floor and the fifth through the 15th floors, data from Propertyshark.com shows.

On Sept. 4, Madison, headed up by Robert Gladstone, sued Courtyard Management, claiming the Marriott International subsidiary provided false information that induced the owners to take on the $62 million loan, while Marriott negotiated a non-disturbance agreement that would protect it in the event of a foreclosure by the lender to keep it in place as manager of the hotel.

That New York State Supreme Court suit, which is ongoing, further alleges that Marriott was providing such poor management that the hotel revenues did not cover debt service payments.

General Electric Capital, which provided the owner with a five-year, $62 million loan in May 2008, sued to foreclose on the mortgage Oct. 30, reinforcing the claim by the owners that money was scarce.

GE Capital says in its lawsuit that Madison stopped making its interest payments in full in September. Madison owes a total of $62.8 million, the papers say.

Madison has continued to make payments although late and in arrears, including one for approximately $112,000 in September, another for $151,000 in late September or October, and a third for $429,000 on October 30, the day the suit was filed, a Madison spokesman said. He said the company would review the lawsuit.

Neither GE Capital nor Marriott immediately responded to a request for comment.


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