Investor Seeks $350M for Getting Squeezed Out of Plaza, Dream Downtown Hotel Buys
By Lauren Elkies Schram June 17, 2015 5:30 pmreprints
A Hong Kong investment company is accusing three companies of boxing it out of a deal to buy The Plaza Hotel, Dream Hotel in Chelsea and London’s Grosvenor Hotel, according to a new $350 million lawsuit.
“Plaintiff has been denied its rights under the agreement as the intended 70 percent owner of the general partnership, including but not limited to various management fees which cannot presently be determined but which are estimated would have been in excess of $350 million, as well as the anticipated increase in the value of the target properties,” the suit claims.
On Jan. 22, Hong Kong-based JTS Trading Ltd., which provides equity and debt capital as well as support and management for various commercial ventures, entered into a joint venture for the acquisition of the landmark Plaza Hotel at 768 Fifth Avenue at Central Park South and Dream Hotel at 355 West 16th Street as well as the Grosvenor House in London. The three properties are owned and operated through various entities of the Indian financial services group Sahara India Pariwar.
Trinity White City Ventures Limited, a United Arab Emirates private trust, was going to contribute $250 million in the purchase and JTS was slated to provide $850 million of equity capital in the deal through a general partnership, the suit says. That general partnership was going to “hold (through an intermediate limited partnership [‘the Limited Partnership’]) majority interests in, and receive management fees from, real estate investment trusts (‘REITs’) and special purpose entities (‘SPEs’) which were to own the acquired properties,” the suit claims.
The deal would have made JTS a 70 percent owner and TWCV a 30 percent owner of the properties. The acquisition financing was slated to be 25 to 35 percent equity with the balance as debt provided by UBS Financial Services.
From Jan. 27 through Feb. 8, JTS and TWCV worked together to create proposals for the properties. The next day, TWCV revealed a financing agreement for the three hotels between TWCV and a Sahara subsidiary, allegedly leaving out JTS. That deal called for one-year loans totaling $1.5 billion and the purchase of $882 million in existing debt. This arrangement, JTS says, was really a “loan-to-own” transaction and included the same structure as the deal initially discussed with JTS.
According to the suit, TWCV indicated that UBS was going to provide the debt and equity capital to fund the Feb. 9 deal. UBS is a defendant in the suit because the bank allegedly “tortiously induced TWCV to breach its exclusivity provision with plaintiff” and “acted intentionally and willfully to enrich itself from the financing arrangements regarding the target properties, at plaintiff’s expense.”
TWCV used JTS’ $850 million equity capital to “open the door to negotiations with Sahara, and then when the opportunity presented itself TWCV, under the transparent guise of a ‘loan-to-own’ structure, refused to honor its contractual commitments to the plaintiff,” the suit says. JTS was then invited to participate in the new transaction with different terms.
The plaintiff’s attorney, Andrew J. Goodman, Esq. of Garvey Schubert Barer, told Commercial Observer that on July 8 the court will hear an argument about whether JTS can put a lien on Sahara’s interest in the two New York City properties during the course of the lawsuit.
Meanwhile, The Wall Street Journal reported a little over a week ago that two Monaco-based brothers, David and Simon Reuben, completed a deal with the Sahara Group’s lender, Bank of China, to pay more than $800 million for the debt on the three hotels. Sahara has sought to sell the hotels to raise money to release company Founder Subrata Roy from jail. He is being held on $1.6 billion bail in New Delhi.
Defendants TWCV and Sahara India Pariwar weren’t immediately reachable for comment and UBS didn’t immediately respond to a request for comment.