Ohana snags Tillary Hotel from bankruptcy as it battles squatters

Ohana Real Estate can bring Downtown Brooklyn’s Tillary Hotel into its family after a messy bankruptcy battle.

The hospitality firm acquired the 174-room hotel and 64-unit apartment building in an auction last month, almost two years after an entity tied to Brooklyn dealmaker Isaac Hager and his business partner Lipa Rubin put the property into bankruptcy.

But it hasn’t been all peace and love since Ohana took over.

Ohana, through the entity TH Holdco, alleges in court filings that a few tenants who appear to be close to Rubin’s son refuse to vacate their apartments. Ohana claims it was forced to call the police on the squatters, but that some still remain.

“The fact that the debtors’ equity lost a lot of money and were unhappy that TH Holdco’s plan was confirmed and their meritless appeal was denied on all grounds should not interfere with a professional transition,” Ohana’s attorney wrote in a filing earlier this month.

Lori Schwartz, an attorney at Leech Tishman Robinson Brog who represents the debtor entity neither confirmed nor denied the presence of squatters, but said in a filing that the debtors have “cooperated fully” with the sale agreement.

“Ohana purchased the Tillary Hotel as is, where is, under the purchase and sale agreement,” Schwartz said.

The drama began early in the pandemic, less than a year after Hager’s Cornell Realty bought the property, at 85 Flatbush Avenue Extension, for $95 million. As lockdowns weighed on the city’s hospitality sector, the hotel was turned into a homeless shelter. By the summer of 2020, the property’s mezzanine lender, Eli Tabak’s Bluestone Group, had initiated a UCC foreclosure around the same time that senior lender Madison Realty Capital filed to foreclose on a $70 million senior loan.

To stop the foreclosure, the debtors hired David Goldwasser, a bankruptcy specialist, to file for Chapter 11 bankruptcy in Judge Robert Drain’s bankruptcy court in White Plains.

The bankruptcy eventually turned ugly.

In January of this year, Madison Realty sold its loan to Ohana, a luxury hospitality lender and investor which owns the Montage Deer Valley ski resort in Utah and the Montage Los Cabos resort in Mexico, among other resorts.

Hager accused Ohana of employing a loan-to-own scheme to seize control of the property. Ohana previously wanted to become a partner in the hotel, Hager said, and he’d even given an Ohana executive a tour.

Franco Famularo, Ohana’s chief investment officer, said there was nothing nefarious about the loan purchase. Famularo acknowledged touring the property, but said that Hager appeared to be clueless about its finances.

“Mr. Hager’s lack of knowledge of the property and his inability to answer basic questions was highly concerning,” Famularo said in a court filing. “It caused an immediate loss of confidence.”

Famularo also disputed an appraisal presented by the debtor and questioned why the best use of the hotel was a homeless shelter.

Meanwhile, Bluestone’s Tabak alleged that Ohana’s bid should be thrown out because it violated a so-called intercreditor agreement that governs the relationship between a senior and mezzanine lender. If Ohana’s bid of $94 million was approved, it would wipe out Bluestone’s mezzanine position.

The debtors submitted their own reorganization plan, claiming to have the backing of Daryl Hagler, a nursing home executive affiliated with Centers Health Care. In June, Hagler said he would inject $96.8 million to fund the plan. But Ohana was skeptical that any of it was real.

“The idea there is another competing plan is fanciful,” Ohana’s lawyers wrote in a court filing.

The court confirmed Ohana’s credit bid and plan to acquire the property on Nov. 9. But when Ohana’s James Cole went to check on the property that morning, he said he noticed something strange. People appeared to be moving into the residences, some with plastic bags full of personal belongings. A staging company was helping move furniture into about 18 of the empty residences, according to a filing in bankruptcy court.

When Cole went to talk to the people occupying the building, they allegedly either refused to speak or would say vague things such as “they were there to visit someone.” Some said they were given permission by Lipa Rubin’s son Sam Rubin, according to a filing by Ohana’s lawyer.

“Mr. Rubin takes issue with TH Holdco’s vague hearsay allegations that he directed or consented to improprieties that occurred after the closing of the credit bid,” Paul Aloe, an attorney at Kudman Trachten Aloe Posner who represented Sam Rubin, said in a court filing.

After calling the debtor’s counsel to discuss the situation, the Ohana entity called the police, a security company and a locksmith, according to Ohana. Cole and the police walked the building and found at least five units without leases. Many of the occupants refused to open the door, while others said they had a lease but were unable to provide a copy. Some occupants claimed to live in apartments that were devoid of furniture, according to a court filing by Ohana’s lawyer. The locksmith ultimately changed the locks.

By the evening of Nov. 9, five squatters were removed and eight remained. By Dec. 2, at least six squatters were still at the Tillary Hotel, according to a filing by Ohana. The debtor’s attorney filed a letter to the court four days later, claiming “significant progress was made” in resolving the outstanding issues since the closing.

The case is one of several involving New York City property entities steered into Drain’s Westchester County courthouse, but the case was reassigned to Judge Sean Lane after Drain retired in June.

The Tillary Hotel was a marquee asset of Hager, a well-known Brooklyn and Queens developer who is the grandson of the late Rabbi Mordechai Hager, the longtime leader of the Viznitz, one of the largest Hasidic sects.

Hager and Hagler, the nursing home investor, recently paid $43 million for a Crown Heights site where Bruce Eichner’s Continuum Company once planned 1,500 apartments.

Hager did not return a request to comment. Ohana declined to comment.