Sharif El-Gamal delays foreclosure at Margaritaville

With time running out, developer makes last-ditch effort with bankruptcy

Soho Properties' Sharif El-Gamal and the Margaritaville hotel at 560 7th Avenue (Getty, Google Maps)

Rich Bockmann

Jul 10, 2023, 1:56 PM

Sharif El-Gamal filed a last-ditch maneuver over the weekend to delay the foreclosure auction for his Margaritaville hotel, which had been scheduled for Monday morning.

The Soho Properties developer put his equity interest in the 234-room hotel at 560 Seventh Avenue into bankruptcy on Sunday as the company tries to negotiate and refinance the property’s debt.

Soho Properties executive Seth Pomerantz wrote in an affidavit that the company’s ultimate goal is to refinance the property’s $309 million in debt in a series of “negotiated payoffs” with its lenders.

There’s no indication, however, that the developer’s lenders are willing to take a reduced payoff.

“Given the projections for future income, the appraised value of the hotel, and the solid location in Times Square where tourism is reviving, the debtor believes that a refinancing of the hotel can ultimately be achieved within a reasonable period of time,” Pomerantz wrote in a filing in bankruptcy court.

Attorneys for senior mezzanine lender Arden Group, which had moved to foreclose on El-Gamal’s equity interest in the property, rescheduled the auction for July 24 — though it’s expected that the auction won’t take place until the bankruptcy case is settled.

El-Gamal’s Hail Mary comes after the developer unsuccessfully sought to have a Manhattan supreme court judge order an injunction to halt the auction. The developer had argued that the marketing process was not commercially reasonable and that Arden was trying to scare off potential bidders, but the judge thought otherwise.

Newmark, which was handling the marketing, wrote in court filings that 37 groups had downloaded due diligence materials on the hotel.

El-Gamal owes $57 million to Arden and another $85 million in junior mezzanine debt to Korean private equity firm Global One Asset Management.

David Sherr’s alternative-lending firm One William Street Capital Management holds a $167 million senior mortgage on the property.

Pomerantz wrote in his bankruptcy filing that the property was appraised in May at somewhere between $226 million and $350 million. The hotel opened in 2021 with revenue shortfalls stemming from the pandemic, but Pomerantz said revenues are improving and expected to surpass $25 million by the end of next year once vacant retail spaces are leased.

New York