The Real Deal New York

Mansfield Hotel facing foreclosure

Investor Trevor Atwell was negotiating to buy property in the area of $65M
By Rich Bockmann | April 21, 2017 04:45PM

Investors Brad Reiss and John Yoon are facing foreclosure on their troubled Mansfield Hotel in Midtown, which has been bleeding cash for more than a year as they negotiated to sell it at an asking price of $65 million.

Wells Fargo, the trustee on the $20 million loan that Reiss and Yoon’s Ark Partners secured in 2006 as they overhauled the century-old hotel at 12 West 44th Street, is working through foreclosure proceedings with the developers in Manhattan State Supreme Court, public records show.

Representatives for the bank and Ark Partners did not immediately respond to requests for comment.

Meanwhile, investor Trevor Atwell is battling with the Nomad-based Wall Street Capital Fund, claiming the investor is trying to gum up his deal to buy the property for somewhere around $65 million.

Atwell filed a lawsuit in Manhattan Supreme Court last year, claiming the investment firm brought him the deal to purchase the hotel, then became unsatisfied with the terms they had negotiated and grew impatient.

Last month Alvin Lin, an attorney at the law firm Morrison Cohen representing Atwell, said he is still negotiating to buy the property.

“[T]he seller’s counsel and plaintiff’s counsel are continuing to work and are actually very close to signing contracts in the underlying deal,” he said, according to a court transcript.

But Wall Street Capital principal John DeMaio argued otherwise.

“What we have here is not an individual with funds. There’s no evidence of any funds or access of funds in this application. What we have is what is generically called within the real estate industry, having done this for many years, a player,” he told the judge, according to the transcript. “I have no problems with a player. Players sometimes bring about deals. What this individual is doing is one constant stalling technique.”

Representatives For Atwell And Wall Street Capital couldn’t be reached.

The conflict with Wells Fargo, meanwhile, is just the latest bump in the road for Ark’s 126-key property on Manhattan’s “Club Row,” which has been in the red for at least a year now. In fact, Credit Suisse, which securitized Ark’s loan, has been reaching into its own pocket to fill a $2.6 million shortfall in revenues in order to keep the hotel afloat, a report from the real estate analytics firm Trepp shows.

The hoteliers control the landmarked property via a long-term ground lease they picked up in 2004. They embarked on an ambitious overhaul of the property that they unveiled in 2007, including a conversion of the hotel’s former library into a chic bar.

The 1903 building designed by the famed architect James Renwick, who is most famous for designing St. Patrick’s Cathedral On Fifth Avenue, holds a special place in New York society on the small stretch of West 44th Street west of Fifth Avenue north of Bryant Park known as “Club Row.”

The block is home to the New York City Bar Association, the New York Yacht Club as well as the Harvard and Penn clubs. The Yale, Princeton, Columbia, Cornell and Brown university clubs are in the nearby area.

The block is also home to the storied hotels: the Iroquois, the Royalton (a favorite hangout of Vanity Fair editors Graydon Carter and Tina Brown), the City Club (where celebrity chef Daniel Boulud’s DB Bistro Moderne offers $35 foie gras sirloin burgers) and the Algonquin (the longest-operating hotel in the city where the bar has a $10,000 martini on the menu). The Sofitel is also nearby.

Ark Partners had a few strong years after it acquired the hotel. In 2008, the hotel was generating revenues of about $11.4 million with expenses of roughly $8.7 million, according to Trepp. The property was operating on a debt-service ratio on income – a widely used measure of an income-generating property’s health – of 2.16. That means that for every $1 of debt Ark had on the property, is was generating $2.16 in income.

But then the recession hit and the property struggled to rebound. In 2015, it was still operating with expenses of $8.7 million, but revenues were far less than they had been seven years earlier at $8.9 million. The property was only churning out $.14 for every dollar it had in debt.

By this time, Ark found itself battling with a group of investors led by landlord Hyman Jacobs, who own the ground underneath the hotel. Ark claimed its landlord was frivolously looking to terminate the long-term lease and took Hyman and his fellow investors to court. The two sides settled the case in 2016.