Sharif El-Gamal wants a judge to step in and block Colony Capital from selling the debt on his Dream Hotel development site in Times Square, until a court can decide whether or not rival developer Hidrock Properties used insider information to try and wrest control of the property.
According to a lawsuit filed in Manhattan State Supreme Court Friday, El-Gamal’s Soho Properties claims that after it and Hidrock discussed Hidrock potentially acquiring some of the project’s air rights last year, Hidrock turned around and violated the nondisclosure agreement it signed “in order to usurp the note, and ultimately the property.”
On Tuesday, The Real Deal reported that Hidrock , led by Jack Hidary, bought the note on the $63 million loan Colony provided to Soho Properties when it acquired the site at 560 Seventh Avenue in 2014. After the story was published, however, some sources said the purchase is yet to be finalized.
A spokesperson for Soho Properties declined to comment on the suit, and a representative for Hidrock could not be immediately reached.
Along with Norman Sturner’s MHP Real Estate Services and the Chatwal family’s Hampshire Hotels, El-Gamal planned to build a 29-story, mixed-use tower with a Dream Hotel. The project was valued at more than $300 million.
But Soho started negotiated for extensions with Colony on the loan’s maturity date up to Jan. 31, 2017, and the two even drafted up another 12-month extension that they never executed.
Soho said it made interest payments until February, but stopped payments because Colony said the loan was in default.
Meanwhile, Soho started discussions last year with Hidrock about potentially buying the air rights to the property. During the discussions, Soho disclosed details regarding the loan, including the maturity date and the project’s financial situation.
According to El-Gamal’s lawsuit, Hidrock maintains they are not purchasing the note. But according to the suit, Hidrock’s attorney, Morris Missry, disclosed “that he coincidentally represents both the Hidrock defendants and the actual purchaser of the note on the property.”
Soho is asking the court to impose a temporary restraining order preventing Colony from selling the note until it can be determined whether or not the potential buyer used confidential information disclosed by Hidrock.
(To view more commercial sales transactions involving Soho Properties, check out our Deal Sheet)