Sharif El-Gamal and his investors are personally on the hook for $86 million in debt after throwing the Margaritaville hotel in Times Square into bankruptcy to stall a foreclosure, the project’s lenders claim.
El-Gamal and his partners, Flintlock Construction Services’ Andrew and Stephen “Chip” Weiss, became personally liable for the hotel’s mezzanine debt when they put their equity stake in the property into bankruptcy on Sunday, lenders Arden Group and Corten Real Estate Partners claim in a lawsuit filed Tuesday.
Developers often protect themselves by limiting the claims a lender can make in the event of a default to just the project’s assets. But many loans contain a “bad boy guarantee” that makes the developer personally liable if they commit certain acts, like putting the project into bankruptcy.
“The guaranty makes clear that guarantors are personally, and jointly and severally, liable for the entire amount owed on the loan in the event (among other things) that borrower or mortgage borrower files for bankruptcy,” the complaint reads.
Representatives for El-Gamal and the Weiss brothers did not immediately respond to requests for comment. PincusCo first reported news of the lawsuit.
The lawsuit comes after the UCC foreclosure auction scheduled for the Margaritaville hotel scheduled for Monday was postponed.
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Sharif El-Gamal delays foreclosure at Margaritaville
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New York
El-Gamal asks judge to call off Margaritaville foreclosure
El-Gamal had tried to delay the sale by asking a judge to issue a temporary restraining order, arguing the marketing process was unfair and the lenders were trying to scare off potential bidders. The judge declined to stay the proceeding, though.
The auction has been rescheduled for July 24, though it probably won’t take place until the bankruptcy case is settled.