Lease auction slated for former Pink Elephant, Crobar home

Tenant alleges attempted $1 million extortion

The bankrupt company that controls a below-market-rate lease of a four-story building in West Chelsea — a property once home to nightclubs like Pink Elephant, Mansion and Crobar —wants to sell the lease to the highest bidder through an auction next month, court records show.

The tenant who controls the 35,000-square-foot building at 530 West 28th Street is battling with its landlord over rent, subleasing rights and taxes reaching back years, bankruptcy records reveal.

The tenant, a company called 530 W. 28th Street LLC, controlled by Joseph Morrissey, filed for Chapter 11 bankruptcy protection in U.S. District Court in Manhattan June 26. The LLC claims that landlord RN Realty demanded a $1 million payment to give its consent so that Morrissey could sublease the space to a new occupant. RN Realty, headed by Neal Schwartz, allegedly refused to give its consent, and no sublease was entered into.

“The landlord first attempted to extort a $1 million payment,” Morrissey’s attorney alleged in court filings. “After that failed, [the landlord] rejected the proposed sublease based on conditions that were unequivocally not included in the lease.”

Robert Wolf, a partner with law firm Moses & Singer, blamed the bankruptcy on the building’s owner. “The tenant is in bankruptcy entirely due to the landlord’s egregious misconduct,” said Wolf, who is representing the debtor in an ongoing civil case between the parties in New York State Supreme Court. In addition, his firm represents Morrissey’s company in the bankruptcy case. Representatives for RN Realty did not immediately respond to a request for comment.

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But RN Realty made its own allegations to explain the troubles in the empty building. “The debtor’s application is nothing more than a well-papered ruse to further delay payment of post-petition rent in furtherance of the debtor’s scheme to force [the landlord] into buying out the lease from the debtor,” the court papers say.

The Long Island auction house David R. Maltz & Co., which put a notice of the auction on its website this week, set a Sept. 13 deadline for sealed bids, pending approval by the bankruptcy judge. The annual rents payment is about $1.34 million, the Maltz listing says. The minimum bid is $2.75 million, even as Morrissey claims in court filings to have offers of about $3 million.

The complex case is taking place in one of Manhattan’s fast-changing neighborhoods. The building, with about 19,256 square feet on the ground floor, is on a mostly industrial block next door to the strip club Scores. Yet it is just north of a bustling art gallery district and just west of the under-construction final segment of the popular High Line elevated park.

The local neighborhood registered its opposition to some of the nightclub activity at the property. In 2010, Community Board 4 opposed the renewal of a liquor license for Pink Elephant.

The legal dispute has its roots in a 20-year lease executed in 2002 by the former leasehold owner who filed for bankruptcy in 2008; that was before Morrissey acquired the lease rights from that entity.