Flatiron Hotel owners move to block $31M DelShah deal

TRD New York /
Dec.December 27, 2013 02:30 PM

The owners of the Flatiron Hotel are seeking to dismiss a lawsuit from a DelShah Capital affiliate, which is trying to enforce a purported $31 million purchase of the property, contending that the deal was a “sham.”

At issue are two apparent sales of the hotel: the first is DelShah’s alleged purchase in May, while the second is a sale to Robert “Toshi” Chan, through an entity called You Gotta Have Faith, which was scheduled to close Dec 4.

Chan, an operator of illegal extended stay apartments, was running the property under a multi-year lease agreement through his company, Smart Apartments.

DelShah, which previously acquired the debt on the property, filed suit on Nov. 25 in New York State Supreme Court to block the second deal for the hotel, at 1141 Broadway, between 26th and 27th streets. The suit effectively halted the Toshi transaction.

However, now one of the hotel’s current owners, Jagdish Vaswani of Main Team Hotel, shot back in court on Dec. 20, claiming that the May acquisition deal cannot legally be enforced because DelShah failed to sign a deal with an authorized representative of the hotel. Additionally, the DelShah affiliate did not legally exist because it did not file required documents with state regulators until November, Main Team asserted.

Main Team alleges that DelShah is purposely trying to prevent the Toshi transaction to collect more than $5,000 a day in interest on the hotel’s debt.

“It is clear that [DelShah] will stop at nothing to prevent the closing from occurring, and ending the stream of money that such a delay gets it,” said Ruth Haber, an attorney with Moses & Singer who represents Main Team, in a court filing.

Lawyers for DelShah and the hotel were not immediately available for comment. DelShah declined to comment, through a spokesperson. Chan was out of town and not immediately available for comment.

DelShah, led by Michael Shah, originally acquired the debt of the hotel after the owners defaulted on an $8 million loan, as The Real Deal reported.

DelShah filed suit in September to collect on $618,000 in alleged back rent and remove Smart Apartments. The suit claimed that Smart Apartments was improperly paying rent directly to the owners, including Main Team, Ibrahim Saleh, and Ming Chu Co. In November, a judge ruled that rent payments had to be turned over to DelShah.

Additionally, the hotel owners have faced a lawsuit from Born to Build, a contractor that sued to enforce a $3.5 million judgment against Saleh for allegedly transferring funds that belonged to it. The hotel owners countersued, claiming they paid Born to Build $7 million, but its contractors walked off the job. A $3.5 million lien arising from the litigation effectively blocked the sale of the hotel, the owners claim.

Main Team claims that DelShah signed its May agreement with George Hourani, a principal of Born to Build, after he acquired Saleh’s stake in the property, the court papers say.

But Saleh, who apparently fled the country, never had authority to make decisions for the hotel, according to the other owners.

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