The Real Deal New York

DelShah wrests some control of Flatiron Hotel from Toshi

By David Jones | November 22, 2013 05:36PM

DelShah Capital, which owns the debt on the Flatiron Hotel, has won a court order effectively forcing the property’s owners and manager, Smart Apartments, to pay any rent owed directly to the firm.

A New York State Supreme Court judge granted DelShah a temporary restraining order Thursday. The ruling also requires Smart Apartments to turn over maintenance contracts and other documents to DelShah by Dec. 9.

Smart Apartments, led by Robert “Toshi” Chan, had operated the 65-room hotel at 1141 Broadway under a prior lease agreement with the property’s owners, Main Team Hotel and Ming Chu Company.

An affiliate of DelShah, led by CEO Michael Shah, sued in September, claiming Smart Apartments had violated a lease agreement and racked up 15 code violations at the property. The firm sought $618,000 in damages, including alleged back rent.

The ruling, according to lawyers for DelShah, prevents Smart Apartments from paying rent to the owners or anyone else.

“We Are Pleased With The Court’s ruling effectively enjoining defendants from paying their rent to anyone but [DelShah] and turning over documents so that we can ensure public safety,” said Scott Loffredo, an attorney for the firm.

Lawyers for Smart Apartments and the hotel owners did not return calls. Chan could not immediately be reached for comment.

DelShah is still working to take full control of the building and was previously named as the new plaintiff in a foreclosure suit against the hotel. DelShah acquired the $8 million debt in the hotel from Brick Realty Capital, which acquired the debt from First Central Savings Bank, the senior lender at the property.

Loffredo declined to comment on DelShah’s next move, including whether it would try to bring in a new operator or convert the property.

“As of now, everything is resolved until another motion is made or it’s scheduled for a trial,” he said.

The ruling comes just days after Smart Apartments reached a $1 million settlement with New York City over its widespread business of operating illegal hotels in condos and rental buildings around the city.