Lawsuit accuses Marriott of misappropriating funds at East Side hotel

Landlord claims hotelier used $12M to boost battered balance sheet

Ashkenazy Acquisition's Ben Ashkenazy and Marriott East Side at 525 Lexington Avenue (Google Maps)
Ashkenazy Acquisition's Ben Ashkenazy and Marriott East Side at 525 Lexington Avenue (Google Maps)

UPDATED, Oct. 14 2020, 3:30 p.m.: Marriott Hotels was sued by a Manhattan landlord for the alleged misappropriation of $12 million at its now-defunct Marriott East Side hotel, but the lawsuit has since been withdrawn.

An Ashkenazy Acquisition-backed joint venture, which owns the building at 525 Lexington Avenue, filed the lawsuit against Marriott in New York State Supreme Court last week, Crain’s reported.

Four days later, the landlord withdrew the lawsuit without prejudice. In a statement, Ashkenazy Acquisitions said the firm and its majority partner, Germany-based investment fund Deka Immobilien Investment, have agreed to withdraw the case and “resolve this matter amicably.”
The lawsuit alleged the hotel used $12 million from maintenance and repair reserves to boost its balance sheet. The landlord also sought $42 million for breach of contract.

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“Marriott has made a simple calculation: issue inflated demands for capital; avoid providing detailed support for these demands; pressure owners in every way imaginable — including contacting their lending institutions, issuing bogus default notices, demanding that hotels anticipating staggering losses remain open; and seizing funds that are the rightful property of the owners — all in an attempt to bolster its corporate balance sheet, which is weighed down by billions in debt,” the lawsuit reads.

Marriott declined to comment to Crain’s.

The Marriott East Side closed permanently in March and laid off more than 300 employees.

It’s one of the many hotels in the city that have either temporarily or permanently closed because of the pandemic. Hilton Times Square, Courtyard by Marriott in Herald Square, and W Hotel in Downtown Manhattan have also announced they will permanently shut down. [Crain’s] — Akiko Matsuda

UPDATE: This story was updated to reflect that the plaintiffs withdrew their complaint.