German investment firm Deka Immobilien unloaded a shuttered Marriott on Manhattan’s East Side last year for a little more than half what it paid for it – then the buyer slapped them with a $17 million bill.
The buyer, Beverly Hills-based Hawkins Way Capital, wants Deka to pay out the $16.9 million in pension benefits of its former hotel employees – even though it agreed to cover the costs, according to a lawsuit filed by Deka in state Supreme Court this last month.
The suit alleges that the sales agreement for 525 Lexington Avenue clears Deka of any responsibility for the pension payouts.
“The parties fully understood that withdrawal liability would be incurred in connection with the hotel property being sold whether due to the transaction itself or by the reduction in workforce at the hotel prior to closing the transaction,” the suit says.
Hawkins paid $153.4 million for the 655-key property — a little more than half the $270 million Deka paid for it in 2015. It then converted the building to student housing.
One year after the deal closed, Hawkins sent Deka the multi-million dollar bill, claiming that Deka was responsible because it stopped operating the hotel in December 2020, affecting a “complete withdrawal from the fund,” according to the complaint.
The hotel stopped accepting guests in March 2020 during COVID but maintained a staff of engineers and maintenance crew who were covered by a collective bargaining agreement, the suit says.
Hawkins declined to comment. A lawyer for Deka did not immediately respond to a request for comment.
The 35-story, 406,000-square-foot building, which opened in 1924 as the Shelton Towers Hotel, is no stranger to controversy. It was sold in 2015 for $270 million to a joint venture between Deka and Ashkenazy Acquisition Corp., which then tried to sell the property starting in 2016.
Three years later, Deka sued Ashkenazy, claiming its partner pulled out of a $174 million deal to take full control of the hotel. After the hotel closed in 2020, the joint venture sued Marriott, alleging over $12 million in hotel revenue was misappropriated to boost its balance sheet.
Deka, which owned an 85 percent stake in the hotel, moved to foreclose on the property in February 2021 after the joint venture allegedly failed to pay off the $53 million mortgage when it came due in July 2020. Later that year, an appellate court ruled that Ashkenazy had to pay its share of a $135 million loan on the hotel.
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