It seemed like the hotel project that couldn’t fail.
But new documents filed as part of a state and federal lawsuits show that the owners of the NoMad hotel at 1170 Broadway neglected to repay more than $100 million owed to lenders and equity investors starting in late 2018, Commercial Observer reported.
Andrew Zobler’s Sydell Group and Make It Nice own the hotel through a ground lease with the Haddad Organization, which is suing the partners in state court.
While the hotel appeared to be financially sound — with gross revenue climbing $2.5 million per year on average from 2015 to 2018, according to CO — court filings show the hotel owners didn’t pay back Colony Capital and Bank of America $140 million in debt that came due in December. Now Colony, which provided a $35 million mezzanine piece, has initiated a UCC foreclosure auction which is set to take place in June.
Haddad’s suit alleges Sydell and Make it Nice failed to resolve building-code violations, including defective facade work. But the partners’ counsel argues that it’s a ploy to gain leverage on a ground lease that was negotiated in a different market.
“It is abundantly clear that the landlord is unhappy with the economic deal reached more than 11 years ago,” Howard Shapiro, a lawyer for the NoMad’s owners, wrote in court documents, “and through this default notice is attempting to extort concessions from the tenant parties to improve that deal.”
The owners are also being sued in federal court by energy giant Chevron, who bought equity in the hotel in 2009. Chevron say part of the agreement allowed them to sell back its ownership share to guarantors GFI Capital and Square Mile Capital Management, but that when they tried to do this in November 2018, the guarantors reneged.
The 168-key luxury hotel, which opened in 2012, was developed by GFI Development, then a partnership between Allen Gross and Zobler, who had also partnered on the Ace Hotel at 20 West 29th Street. Following a legal dispute between the partners, GFI sold its interest in the NoMad Hotel. [CO] — Decca Muldowney