After securing $9M in EB-5 funds, Hotel Astor is in financial distress, court documents allege

Ex-general manager is seeking payment related to settlement of wrongful termination case

December 04, 2017 03:00 PM

Hotel Astor (Credit: Hotel Astor)

Two years after being approved as an EB-5 project, Miami Beach’s Hotel Astor appears to be struggling to stay afloat, according to documents tied to recent lawsuits filed against the owner of the Art Deco-style property.

In an affirmative defense filed two weeks ago in response to a suit filed by the hotel’s ex-general manager Eli Kostbar in Miami-Dade Circuit Court, Astor EB-5 LLC claims it is unable to pay him $30,000 that was part of a settlement reached four months ago. The settlement was the result of a separate lawsuit for wrongful termination.

David Hart, a principal for Astor EB-5, and his attorney Kevin Guanaga declined comment. Richard Celler, the lawyer representing Kostbar, did not respond to phone messages.

Kostbar again sued Astor EB-5 Oct 26 for allegedly breaching the settlement deal that was to pay him a total of $90,000. He received a $50,000 payment on Sept. 25, but Astor failed to make the second payment that was due on Oct. 25, Kostbar alleges. The remaining $10,000 was due on Nov. 24.

Astor EB-5 alleges that the hotel at 956 Washington Avenue in Miami Beach sustained damage from Hurricane Irma and had to temporarily close. As a result, Astor EB-5 failed to generate revenues earmarked for the settlment payments. “Astor asserts it could not perform under the contract because it was impossible or impratical to do so,” the affirmative defense states.

In another affirmative defense filed on Nov. 3 responding to a lawsuit filed by hotel management company Stem LLC and its owner Robert Van Eerde, Astor EB-5 also claims that it is having severe financial difficulties. “Astor has suffered numerous economic hardships, too numerous to catalog, making it impossible to pay [Stem,]” the second affirmative defense states.

On Aug. 31, Stem and Van Eerde sued Astor EB-5 and Hart for breach of contract, fraud and damage to its reputation. According to Stem’s lawsuit, the company entered into a hotel management contract with Astor EB-5 to run the property’s day-to-day operations on Aug. 24, 2014. However, the deal soured over the next three years.

Stem alleges that Van Eerde and Hart entered into a termination agreement on May 18 in which the hotel management company would get $43,000 from Astor EB-5. Stem received the first payment, for $25,000, but alleges that Astor EB-5 failed to begin making monthly payments of $1,500 until the remaining $18,000 was paid off, Van Eerde’s lawsuit states. Barry Chase, the lawyer for Stem and Van Eerde, declined comment. Chase, the lawyer for Stem and Van Eerde, did not respond to requests for comment.

Astor EB-5 accuses Stem and Van Eerde of failing to perform their duties, including failing to prepare financial reports, payroll for hotel staff and create a reserve fund. “Van Eerde used Stem LLC as an instrumentality to hide his incompetence and manipulated [Astor EB-5] to the point he prevented [Astor EB-5] from hiring a qualified person for its hotel management contract engagements,” the affirmative defense states.

In 2015, Astor EB-5 was granted EB-5 status by the U.S. Citizenship and Immigration Services office after the company secured 18 investors from Brazil, China, and Venezuela to fund $9 million in renovations. The investors put in $500,000 each in exchange for obtaining their permanent U.S. residency.

Hotel Astor has 42 rooms and a 5,000-square-foot restaurant.

Harunobu Coryne contributed reporting.

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