DelShah escalates battle for control of Flatiron Hotel

Nov.November 06, 2013 08:11 AM

DelShah Capital has stepped up its efforts to wrest control of the Flatiron Hotel. The firm, which owns the debt on the property, is seeking a court order forcing the beleaguered owners and property manager Smart Apartments to pay it rent directly, as well as hand over a bevy of documents necessary to operate the property.

An affiliate of DelShah, led by CEO Michael Shah, originally sued the owners of the hotel at 1141 Broadway in September in New York State Supreme Court, as The Real Deal reported. The company, which acquired the hotel’s outstanding mortgage debt earlier this year, claimed that Smart Apartments failed to start paying rent directly to DelShah instead of the owners, as required under a lease agreement, and racked up 15 building code violations.

On Monday, DelShah requested an injunction against the owners — Ibrahim Saleh, Main Team Hotel and Ming Chu Company — and Smart Apartments, a defunct operator of short-term rentals led by Robert “Toshi” Chan, to enforce direct lease payments and get access to lease agreements, maintenance contracts and other documents needed to operate the property.

DelShah is seeking to take over the hotel and replace Smart Apartments, as well as secure $618,000 in damages for allegedly unpaid rent. Smart Apartments operates the Flatiron for the owners, but was effectively shut down earlier this year by the city for allegedly operating illegal apartments.

The defendants’ “refusal to acknowledge [DelShah] as ‘successor landlord’ is contrary to the explicit terms of their lease agreement and acts to deprive [DelShah] of the benefit of preserving and maintaining the subject property,” the company said in an affidavit.

Lawyers for the hotel owners and Smart Apartments were not immediately available, nor was a spokesperson for DelShah or officials at the Flatiron.

The code violations include illegal scaffolding and working without permits, according to DelShah’s filing.

DelShah bought the debt at the Flatiron in May from Brick Realty Capital, which acquired the original $8 million defaulted mortgage from First Central Savings Bank, a Long Island lender.

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