A developer that sought to build a Starwood Aloft Hotel in Long Island City filed for Chapter 11 bankruptcy protection just over a month after its lender U.S. Bank won a $19.6 million judgment against it in state court.
The single-purpose entity Queens Plaza Development, based in Brooklyn, planned to build a 16-story hotel at 29-37 41st Avenue just north of Queens Plaza. However the weak economy made it impossible to get construction financing and the project stalled, papers filed last Wednesday in federal bankruptcy court in Brooklyn say.
“The debtor seeks the breathing spell of the bankruptcy process in order to… avoid any further state court litigation with respect to the property and to facilitate a sale of the property,” to repay creditors, the papers say.
A real estate insider said the bankruptcy move could be a way to try and speed up the sale of the property [to anyone] through what can be a faster federal process compared to the drawn out foreclosure system in state court.
The bankruptcy papers provide an estimated value of Queens Plaza Development’s assets at $11 million, made up almost entirely of the parcel of land. The company’s liabilities were $16 million, which included secured claims of $15.6 million, the court papers said.
In April 2007, Queens Plaza Development borrowed $17.24 million for the purchase of the property, but was not able to repay the loan, the court documents indicate.
The bank in April 2009 sued in New York State Supreme Court to recover the loan, including naming four investors who acted as guarantors, and a judge ruled in the bank’s favor, according to a ruling published April 2010.
The state court entered a judgment against the developer for $19.6 million Aug. 2. As part of that judgment, one of the developers, Moshe Feller of Brooklyn, was personally liable as a guarantor for just over $7 million, state court records show. The other three guarantors struck an agreement last month with the lender making them no longer liable, court papers say.
An attorney representing U.S. Bank declined to comment. Feller and an attorney for Queens Plaza Development did not immediately return calls for comment.