A judge has approved Michael Shah’s bankruptcy plan for two retail condominiums at the Morgan Lofts development in Murray Hill, The Real Deal has learned.
The Bankruptcy Court ruling allows Shah to sell the units for a little more than $6 million to Manhattan-based Dishi & Sons. The deal must close within 30 days, a representative for Shah’s DelShah Capital told TRD.
Still, the sale is just the first piece of an involved workout at the distressed development, at 11 East 36th Street, a source said.
DelShah, a buyer of distressed debt, bought two notes at Morgan Lofts — one in 2011 and the other in 2012. Those positions leave him as the senior debt holder on 19 residential units, two retail condos and an office condo, at the mixed-use project between Madison and Fifth avenues, a source close to the deal said.
The Morgan Lofts original sponsor, the Bobker Group, held the retail through an entity called Bay Condos LLC, which declared bankruptcy in 2011, a representative for Bobker confirmed. Two other entities controlled by Bobker, Morgan Lofts LLC and 11 East 36th LLC, have filed for bankruptcy in the last 48 hours, a source said.
In 2010, Delshah bought a note from Chinatrust Bank for an undisclosed amount, the collateral for which was five residential units at the development, a source said. Then, last year, the company bought a first mortgage, from First Central Savings Bank, for $11. The collateral for that loan was 14 residential units at the building and all of the commercial condos, a news release at the time said.
The bankruptcies of the second two LLCs should clear the way for DelShah to unload the other assets the company holds at the development. They should sell for $12 to $14 million, depending on how they are packaged and marketed, the source said.
Morgan Lofts, which was redeveloped starting in 2006 but was stalled due to the recession, has 70 residential condos besides the three commercial condos.
The bankruptcy of the sponsor is not good news for the owners and debt holders at the remaining units, however, Shah said.
“It’s very unfortunate that they chose to do that because it is going to make it very difficult if not impossible for the other owners to either refinance or sell their units to someone who intends to get a mortgage,” Michael Shah said. He declined to comment on other aspects of the bankruptcy proceedings.
The retail units slated for sale are occupied by a bar called the Ginger Man and a dry cleaners.
No contact number was available for Dishi & Sons.
Additional reporting by Zachary Kussin