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NYC asset manager files suit over Austin hotel conversions
Domain Holdings borrowed $19M from Benefit Street Partners and allegedly never used it as intended
Asset manager Benefit Street Partners filed a complaint Wednesday in New York state court against a Delaware-based company over a loan for a pair of hotel conversion projects in Austin, TX.
Benefit Street, a wholly owned subsidiary of private banker Franklin Templeton Investments, supplied a $19 million loan to TGP Domain Holding Company in March 2021, according to court documents.
The loan agreement specified that Domain, and managing director David Rottman, were to use the loan to fund the conversion of two Austin hotel properties into multifamily apartment complexes with a completion deadline of April 9, 2022. It specifically stated that the two properties would consist of 241 units minimum and be part of BSP’s larger multifamily trust.
The properties, both Extended Stay America hotels, are located at 2700 Gracy Farms Lane and 9100 Waterford Centre Boulevard in Austin.
While the Waterford hotel is permanently closed, the Gracy Farms hotel is still in full operation, and neither property has been converted to multifamily as per the loan agreement. BSP is pushing for the Commercial Division of the New York County Court to declare Domain in default on the terms of the loan.
“This action thus seeks and will obtain redress for Defendants’ unmistakable defaults and breaches of contract,” the complaint reads.
This is not the first hotel-related dispute BSP has filed in recent years, as the company also claimed in 2020 that borrower Constantino Sagonas violated his agreement with the lender by allowing Toby Moskovits — the controversial CEO of Heritage Equity Partners — to retain control of the Williamsburg Hotel in New York.
The plaintiffs’ complaint quoted from the plan to renovate the Gracy Farms location — aptly named the “Gracy Renovation Plan” — to underline that the hotel was indeed intended for multifamily conversion.
“A new multifamily concept is born, only steps from Austin’s exploding Metropolis: The Domain. The Miles will become a living destination for the savvy workforce in Austin,” a portion of the plan description reads. “The conversion of the Extended Stay America Hotel to an apartment complex focuses on a style which will elevate the property and an affordable renovation with maximum impact and affordable investment.
Hotels in Austin started to see a rebound earlier this year, and data from CBRE suggests the Texas hotel industry will be back to pre-pandemic levels by the end of the year.