El-Gamal asks judge to call off Margaritaville foreclosure
Developer claims Arden Group is trying to deter potential bidders
Sharif El-Gamal is calling a Hail Mary to try and save his Margaritaville Hotel.
The developer on Wednesday asked a judge to call off the UCC foreclosure auction for his 234-room Times Square hotel, which is scheduled to take place in a week and a half.
The head of Soho Properties argues that his lender, Craig Spencer’s Arden Group, rigged the auction process to scare off potential buyers for the property at 560 Seventh Avenue.
“[Arden’s] intent here is obvious,” El-Gamal’s attorneys wrote in a lawsuit filed Wednesday in Manhattan Supreme Court. “It hopes to seize control of the property and benefit from [El-Gamal’s] hard work.”
The developer’s attorneys argue that Arden’s foreclosure process is “commercially unreasonable” — a violation that can nullify an auction. El-Gamal’s team said Newmark, the brokerage handling the process, is having prospective bidders sign nondisclosure agreements that prevent them from communicating with the developer.
“It is typical and customary to have a borrower participate in an auction, as it can often be the best outcome for all stakeholders,” the attorneys wrote.
El-Gamal also claims Arden isn’t giving bidders enough time to evaluate the property.
Notice of the auction was posted April 10, but El-Gamal said information on the terms of the sale and bidding instructions were circulated more than two months later on June 23.
With the auction set for July 10 and the Fourth of July weekend coming up, he says 13 days is not enough time. Bidders are also required to put down a deposit of either $5 million or 5 percent of the maximum possible bid, without knowing what will happen to their deposit if the sale is adjourned.
A representative for Arden Group did not immediately respond to a request for comment.
El-Gamal defaulted on his $57 million mezzanine loan when he failed to make payments in March.
The developer claimed in his lawsuit that he was close to getting a term sheet to refinance the loan and asked Arden to postpone the auction to get it signed. He said the hotel was appraised in May and was valued between $266 million and $350 million.