The Real Deal New York

Thor, PGIM hammer out settlement over James hotel deal

Sitt's firm has been in contract to buy trendy Soho property for over a year
By Mark Maurer | August 29, 2017 02:39PM

The James New York hotel at 27 Grand Street in Soho, Joseph Sitt and PGIM’s Eric Adler

The owner and would-be buyer of the James Hotel have worked out a settlement agreement after a messy legal battle, paving the way for the sale of the trendy Soho property.

A year after PGIM Real Estate signed a contract to sell the 114-key hotel at 27 Grand Street to Joseph Sitt’s Thor Equities, the property remains in limbo, mired in litigation.

The settlement has not yet been approved in New York State Supreme Court, sources told The Real Deal. But a judge is expected to review the settlement in the next week, they said, and if approved, Thor is expected to close on the purchase.

PGIM, formerly Prudential Real Estate Investors, agreed to sell the property to Thor for $70 million, in a deal struck on Aug. 21, 2016, according to court records and sources. Then, in December, PGIM sued the firm for allegedly breaching the contract. The parties agreed to push back the closing date multiple times but failed to close by the final date in December, the suit alleged.

At the center of the dispute was PGIM’s contract stipulation that Thor pursue the approval of the transfer of the hotel’s liquor licenses from the New York State Liquor Authority and Community Board 2. PGIM claims Thor failed to do so, “intentionally engineering the failure of its applications” for a temporary retail permit by the State Liquor Authority and the community board.

In the complaint, PGIM alleged, “It appears that, in the fall of 2016, buyer decided that it no longer wanted to buy the hotel. Under the agreement, however, the due diligence period had long since ended and buyer was obligated to purchase the property ‘as is.’”

In the months that followed, however, Thor filed a motion to dismiss and continued to pursue liquor license approvals. On Aug. 16, the State Liquor Authority denied Thor’s application for permanent liquor licenses.

In a court hearing the next day, Zachary Rosenbaum, a lawyer for PGIM, remarked on the latest rejection, saying, “One of the comments from one of the commissioners was you’re trying to make a Las Vegas hotel in Soho, you know, with these 4 a.m. closing hours and DJs on the roof and things like that, and that was fundamentally the reason it’s been rejected all the way along.”

At the time of the hearing, prior to the settlement, Thor’s lawyer Joseph Matalon said the developer prefers to acquire the hotel with the liquor license it seeks. If that wasn’t an option, Matalon said, Thor would want its deposit back.

Representatives for Thor and PGIM declined to comment.

If the 20-story hotel sells for $70 million – or $614,000 per key – it will be at a $13 million loss. (Prudential had bought the hotel in 2013 from Brack Capital Real Estate, which developed it in 2010.)

Thor TRData LogoTINY has been accused of not closing on deals, such as a 280,000-square-foot Bronx rental building and 24-building portfolio.