Facing deadline on Israeli bonds, Delshah finds buyer for 55 Gansevoort

When a deal to sell a Meatpacking District building fell through two months ago, Delshah Capital landed in technical default on a $59 million Israeli debt offering backed by the property.

But on Friday, Michael Shah’s firm locked down a buyer for the property: Restoration Hardware.

The retailer went into contract to purchase 55 Gansevoort Street, home to its boutique hotel RH Guesthouse, for about $58 million, according to a prepackaged bankruptcy filed Monday.

The sale, coupled with another deal, should generate enough cash for Shah to pay off the bonds before they come due.

He had to do some maneuvering to escape the predicament.

The bonds’ original due date was Sept 30. Eyeing that maturity, Delshah Capital signed a deal in the spring to sell 55 Gansevoort. But the buyer backed out, prompting a ratings agency to downgrade the bonds, which triggered a technical default.

To buy time and assuage bondholders, Delshah cut a deal.

Half a mile south of Gansevoort, the firm was already in contract to sell 100 Christopher Street to Lions Group for $30 million. Delshah offered to pay bondholders with the proceeds from that sale and file a prepackaged bankruptcy to speed the deal.

Bondholders agreed to the solution, which also pushed the bonds’ maturity date to Dec. 31. The extension afforded Delshah time to close on 100 Christopher, find a buyer for 55 Gansevoort and pay back the debt.

Lions Group bought 100 Christopher on Oct. 23 for $30 million, property records show.

Shah said the prepackaged bankruptcy on 55 Gansevoort was also okayed by bondholders. The deal with Restoration Hardware is targeted to close Dec. 1, according to the bankruptcy filing.

Restoration Hardware did not respond to a request for comment.

The $58 million sale price was 17 percent below the $70 million asking price in a July marketing post by Meridian Investment Sales. But Shah said the deal should leave Delshah with extra cash after it repays the bonds.

The debt offering was valued at $55 million on Monday, according to bankruptcy records.

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After paying off the mortgage on 100 Chirstopher and sale costs, Shah said the firm should have $3 million to $5 million left over.

Shah said the firm plans to target distressed retail, multifamily and commercial properties in New York.