Correction: The story below misidentifies the buyer of the $63 million loan on the Dream Hotel site. It is Eli Cohen, as reported June 5 by The Real Deal.
Jack Hidary’s Hidrock Properties purchased the debt on the Dream Hotel project just south of Times Square, sources told The Real Deal, putting a big question mark on Sharif El-Gamal and MHP Real Estate Services’ plan to build the hotel.
Hidrock took control of the debt on 560 Seventh Avenue, purchasing the $63 million note from Colony Capital, sources said. It’s an indication the developer plans to take control of the property, where El-Gamal’s Soho Properties, in partnership with Norman Sturner’s MHP and the Chatwal family’s Hampshire Hotels, envisioned a 29-story mixed-use tower with a Dream Hotel. The project was valued at over $300 million.
In an interesting twist, Hidrock is said to have funded the purchase of the note with financing from Michael Dell’s MSD Capital, sources said. MSD participated in the $219 million Sharia-compliant loan El-Gamal landed last year for His 45 Park Place condo project in Tribeca.
It wasn’t clear what Hidrock paid to acquire the debt. Spokespersons for Soho Properties and Colony Capital declined to comment, while representatives for MHP and MSD Capital could not be reached.
Colony made the loan to the partners in 2014, when El-Gamal and MHP teamed up with plans to develop a Dream Hotel with a retail component and a new home for the Garment District Synagogue at the site, which holds nearly 130,000 square feet of development rights.
The partners paid $62.3 million to buy the property in 2014, and then another $9.2 million the next year to buy just under 20,000 square feet of development rights from the Neil Simon Theatre. By Including A Public Plaza, they could add a bonus of roughly 10,000 square feet, which would bring their basis in the project to somewhere around $560 per buildable square foot.
But as the city’s hotel market has struggled through a glut of new rooms, El-Gamal has had difficulty landing construction financing, several sources said. It wasn’t clear if the loan ever went into default, but Colony began looking for buyers to take the debt.
Hidrock, which earlier this year sold its 317-key Courtyard Marriott near the World Trade Center for $206 million, is an experienced hotel developer and could step in to take over the site.
The Durst Organization did something similar last year when it negotiated a deal with Bruce Eichner to buy his East Harlem development site at 1800 Park Avenue after acquiring distressed debt on the property and moving to foreclose.