[Updated 3:17 p.m. with defaulted mezzanine debt auction date and marketing information] A state Supreme Court judge last week approved a foreclosure judgment against the MAve Hotel, a boutique property in the Flatiron District that was developed by Roxy Deli owner Joseph Ben Moha and Livorno Properties principal Ben Zion Suky.
The defaulted mezzanine debt is scheduled for auction May 17 at 60 Centre Street. The collateral is being marketed through the New York office of London-based Savills plc, according to documents obtained by The Real Deal.
Providence, R.I.-based Textron Financial, in the suit originally filed in 2010, says it made two loans valued at $16.5 million to finance the acquisition and renovate the property at 62 Madison Avenue and 27th Street. The developers defaulted on the loan after failing to make monthly payments in October and November 2009, forcing the lender to accelerate the loan and demand $17.1 million in a November 2009 letter.
The developers sought a $30 million loan to buy and renovate the former Madison Hotel, which they acquired for $32 million in 2008, into a modern 70-room hotel.
Textron alleges it agreed to make an $8.4 million building loan and $21 million project loan with the borrowers.
But, by early 2009, the borrowers decided to abandon the original plan for a luxury property, fell into debt with the project’s original architect, defaulted on mezzanine loans and failed to maintain accurate financial records, according to the complaint. Instead of calling in the loan right away, the lender agreed to amend the original loan.
Under the amended agreement, the original $30 million loan deal was reduced to $16.5 million and the developers agreed to develop a 70- to 74-room budget hotel. Construction of the new hotel was completed July 2, 2009, and monthly payments came due starting the following month. By October 2009, the borrowers failed to make monthly payments through February 2010.
Attorney Margaret Mayo, a partner with Gaffin and Mayo, was appointed receiver over the property, and court records show that she not only proceeded to complete renovations at the property, but she also negotiated an interim agreement with unionized workers. Mayo was not immediately available for comment.
By May 2010, the loan was sold by Textron to Manhattan-based Madison Capital, court documents show.
David Steinberg, managing director at Madison Capital, said the “loan is in default and we’re pursuing our remedies at this point.”
Lawyers for the developers have filed an appeal, court documents show.
A separate lawsuit was filed by Carolyn Meinwald against the developers after they defaulted on a $5 million mezzanine loan. They borrowed the funds from the estate of Lawrence Meinwald, who purchased the 81-room 11-story hotel in1982.
Court records obtained by The Real Deal show that Madison Capital acquired the mezzanine loan Feb. 15, 2011, and filed documents April 11 in the Meinwald foreclosure case to take over as the plaintiff. Steinberg declined to comment on the mezzanine loan.
The developers could not be reached for comment and their lawyers did not return phone calls seeking comment.