Steve Witkoff and hotelier Ian Schrager have run out the clock on their mortgage at the hip Public Hotel on the Lower East Side, and now it’s costing them.
The developers defaulted on their $189 million mortgage backing the 367-room hotel at 215 Chrystie Street after blowing past its maturity date, and are now paying a 9 percent penalty interest rate.
Their lender, Deutsche Bank, is looking to sell the non-performing loan, according to marketing materials from Eastdil Secured, which is handling the note sale. An investor could buy the debt to take control of the property through foreclosure or look to negotiate with the borrowers to get repaid.
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Witkoff declined to comment. Schrager and Deutsche Bank did not immediately respond to requests for comment.
The partners developed the 26-story building, which also includes 11 condominium units, in 2017, promising to bring affordable luxury accommodations to the trendy neighborhood.
The hotel was forced to shut its doors at the onset of the pandemic in March 2020, which Schrager called “an agonizing decision” and “one of the hardest things I have had to do in my entire career.”
The Public reopened last summer with a bash attended by celebrities including Zoë Kravitz and Julia Fox, the New York Post reported, but its troubles weren’t over.
The property became embroiled in a lawsuit brought by EB-5 investors who claim Schrager and Witkoff loaded the property up with debt and siphoned off more than $100 million for themselves.
At a hearing in March, an attorney for the developers said they had pumped $20 million in rescue capital into the hotel over the past two years to keep it afloat, and that the EB-5 investors’ lawsuit was impeding efforts to refinance the property and avoid foreclosure.