How Toshi Chan Went From Actor to Illegal Hotel Kingpin to Respectable Chelsea Hotelier

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Chan, 43, was always at the cusp of prominence with his parties or taking a small role in Martin Scorsese’s The Departed, in which he was a Chinese gangster facing off against Jack Nicholson—but he truly made a name for himself running some not-exactly-legal hotels in Williamsburg, Brooklyn.

A state law enacted five years ago aimed at cracking down on illegal hotels ruined Chan’s business, which involved renting out apartments on a nightly basis, à la Airbnb, before Airbnb was a thing.

Today, however, Chan says he’s on the straight and narrow as a partner in the Flatiron Hotel at 9 West 26th Street at the corner of Broadway and Toshi’s Living Room—the hotel’s lounge that is known for its live music. (Now that he’s gone legit, he’s somewhat more sympathetic to the new bill blocking Airbnb in New York State.)

Getting a hold of the hotel required a lengthy legal battle that put his acting career on hold and nearly bankrupted him. Investor Michael Shah bought the debt on the property and tried to foreclose on it, Chan explained, but he fought it out in court and was able to refinance the hotel two years ago. (“It worked out well for everyone,” Shah said when reached by email. “That was a fun deal with a lot of twists and turns.”)

The experience inspired him to launch yet another venture: a private equity firm. Brandishing himself as a “mini-Michael Shah,” Chan began investing and buying distressed debt. It’s by no means his first foray into real estate: He bought his first property on South 8th Street in Williamsburg in 2000 and now owns practically the entire block.

That’s where Commercial Observer met with Chan last week at his penthouse apartment at the foot of the Williamsburg Bridge. Joined by his girlfriend, Clara Lorenz, and his two dogs, the seven-year-old Ponzu (a Maltese and Yorkie mix) and the seven-month-old Chanel (a Maltese and Poodle mix), Chan brewed us some tea and told us about the many times he’s reinvented himself.

Commercial Observer: How are things at the Flatiron Hotel? 

Chan: We’ve been very lucky. That whole area has really gone crazy. When I first opened the place five years ago, the streets were desolate. We still had all the garment wholesale, jewelry. It’s been completely, commercially gentrified. 

Why did you decide to do the hotel there? 

The mayor was sending SWAT teams to all my buildings. The Fire Department, Department of Buildings and the police were all coming to shut down my vacation-rental business. 

Your Williamsburg properties, right? 

It was all over the city. We had 40 buildings. I had such a good reputation with all the real estate people. They all knew me: My handshake and my personal guarantee was enough. We went from a $5,000 a month operation to a $12 million a year operation in three years. And it would have gone even further, had the government not stopped me. I mean every landlord would have just rented to me instead of renting to a tenant.  And [government officials] were right. Listen, I’m on the other side now. I’m a hotel owner. I went into the hotel business because I had Mayor [Michael] Bloomberg’s entire office with their boot up my butt.  I said, “Okay, I see your point. You’re absolutely right. What was I thinking?” 

What drew you to West 26th Street? 

A broker said, “Listen, we know that your tail is behind your legs, and the writing is on the wall. You are going to get crushed. We have this one thing. No one wants it.” 

The day I saw it I said I wanted to make a deal. A lot of other people who are much richer than me low-balled the guy. I said, “I’m going to give you full price, except that I can’t give it to you today. So why don’t we give you a really, really crazy rent. Give me an option and give me five years to do it.”

Everything went kind of somewhat according to plan. But I survived. I’m not the majority owner now, but I’m the part owner.

Who is the majority owner then? 

Actually the seller [Jagdish Vaswani] partnered with me. He just said, “Listen, why don’t we go in together?” 

What’s the next different thing that you’re doing? 

I’m opening a private equity firm where I am lending money, buying distressed debt and looking for opportunities.

In real estate?

Yes, because I’m not clever enough to understand stocks, nor tech, nor a lot of other things. I love real estate. It’s something that’s always in demand, mainly because it’s simple and not complicated. 

Do you have a name for the firm? 

American Born Chinese Capital. 

When and why did you start it? 

I started in May of last year. The moment I became partners at the hotel, I immediately bought my first distressed debt under American Born Chinese Capital.

And it’s because Michael Shah—for me—was almost like a death knell. He bought the debt [on the hotel]. He almost crushed me. He did everything that was so, so clever—befitting of someone who was number one in his year at Harvard Law School.

The first thing I did [afterward] was become a mini-Michael Shah. But I want to do it in a nice way. With some different mission statement, hopefully to do good. I’m not disparaging him. But for myself I want to use this newfound skill. 

So I took the boot that he had on my Adam’s Apple, and Mayor Bloomberg’s boot that he had up my lower orifice, and I’m trying to use this knowledge to accumulate wealth as much as I can, to do what I’ve always wanted to do, which is to improve the world. It sounds really corny, but that’s what I’m trying to do. 

What’s your relationship with Michael Shah like now? 

Very cordial. I haven’t talked to him in a while. He came afterwards and said, “Listen, nothing personal.” He should have gotten the hotel. He had everything on his side: He had the money, he had the debt and he had us in a vice grip. Just by the grace of God, I was lucky to convince the owner to work with me and we both survived that foreclosure. 

How did you do it? 

Well, mainly because I finally got a title company to insure us. I tried three times to buy the hotel at my strike price, and at favorable terms, with the seller lending me money to buy because I didn’t have enough money.

But every time Michael Shah emailed some document, clouding the title. He emailed a contract that had sold him the hotel by someone who was the former manager or contractor. And he said, “Toshi’s contract with Jagdish Vaswani is not valid. I have a contract. I have a contract that I’m supposed to be buying the hotel.” Oh, my God.

We finally found a way to get title insurance. But I could never get a title insurance as the buyer—but I could, finally, get [it through] a refinance. No one else would issue a title insurance because of this contract [issue]. 

It cost us a pound of flesh. [Shah] wasn’t the first one—he was the last and most powerful and most clever. He was brilliant. 

And at the closing, he threw the last red-hot poker up my butt. “Oh, you know these mechanics liens that are like $1 million that would have expired? And would have been worthless after the foreclosure?”

It cost us another $1.2 million. I’m sure that Michael did something very clever and made a deal with the people. He did something that was probably very smart. That’s why I have nothing but very good things to say about him. This guy used every rule.

What got you into the hospitality business? 

I was throwing parties, working four months out of the year. The rest of the months I was traveling.

I said, “Well let me think about another business. I’ll rent out my spare guest room.” I usually use it for my mom, but she doesn’t visit that often. I started making more money on my guest room than I did with my long-term apartments. And my apartments are nice. I had so much demand that I started renting all of the apartments next door. 

One landlord owns a bunch of buildings in Williamsburg. I started renting all of those. He introduced me to all the other [landlords]. It happened to be at the time where we had the crisis 2007 to 2008. Back then, rents dropped. People were giving concessions and free months [of rent]. So I went from my one little guest room to like 500 apartments in three years.

That’s when Mayor Bloomberg [came] at me. Man, every single line of my taxes was audited. Then on top of it, I had the hotel vultures to deal with. Because they put my now-partner into foreclosure because he had his own issues. That was a very interesting period. 

Did you ever meet Bloomberg? 

Only the head of the mayor’s task force. I never got to meet Bloomberg. There’s no upside for him to meet the Public Enemy No. 1 in short-term rentals.

What do you think about everything going on right now with Airbnb? 

I think they have a great product. This law takes a big dent out of their revenue and valuation. Because, I think, New York accounts for $100 million for them each year. 

I feel bad for Airbnb. Not too bad, because they’re all billionaires. I feel great as a hotel owner, though.

The hotel industry will benefit greatly from this. I think that it makes a chance of a downturn of the hotel market in New York City much less likely. This is going to improve room rates. By improving room rates, you improve net operating income and room revenue. I’m happy as a clam about this actually.

[Laughs] Great job. I think they could keep going. If I had to guess, at some point there’s going to be a sensible way to have affordable short-term rentals here. Someone will find a way. I’d like to be that person. But right now I have a lot on my plate.

Do you think there’s a bubble for hotels in New York City now? 

There’s a huge potential bubble before this. You’ve seen hotel values really go crazy since 2007. I think the prices are really high for hotels. I do still see some retrenchment, some correction in hotel prices. You’re already seeing people not paying crazy prices for hotels. But I think the fact that they’re doing this to Airbnb means any downturn is going to be muted. It’s not as dangerous anymore. 

But I do see a correction. It makes sense, but only because it’s gone up so fast. For me, any correction is an opportunity to buy out the weaker players. Hopefully I’m not one of the weaker players.

How did you end up in The Departed?

Again, dumb luck. I was in Europe throwing a party. That was my business at the time in 2004, prior to the short-term rentals. 

I got a call from my agent. He said, “You know that thing you auditioned for? They want you back.” I never knew who or what it was, who the stars were. He said, “Listen, it’s Martin Scorsese. And they’d like you to come back.” I said, “Okay, is he paying for my flight? Because it’s expensive.” This is Easter. So he needs me back Monday, and it’s Good Friday. At first I said, “No, I’m not coming back.” Then I thought about it for two seconds, and I called back to say I would come back. I had auditioned for a billion things. Never got any of it. I said there’s no way I’m going to get this. But I don’t want to go through my life thinking that I didn’t try. 

I went there. He wouldn’t pay for my flight though. It went down from hundreds of people to a dozen people down to two people and then I got it. 

It’s not a money life-changer for me, but it’s a life-changer for me in terms of “Hey, I’m not a party-thrower any more.”

What was it like filming and going face to face with Jack Nicholson?

It was awesome. I was really angry. 

They put me in the crappiest, piss-strewn trailer. Tiny. Like the size of one of those [prison pens] in Vietnam where they put prisoners of war. 

[Nicholson] and Leonardo [DiCaprio] had these huge things. As an actor, you use things. So I used that as my chip.

In the thing, I have to stay in character, because, if I let reality seep in, I would be completely overwhelmed and intimidated. I used that motivation of sleeping in piss smell, and I had fun with it. 

Where does “Toshi” come from? 

Okay, so I wasn’t really popular in high school.

Neither was I.

Try being a Chinese guy [laughs]. I went to an all-Irish and all-Italian prep school. When I went to my 10-year high school reunion no one remembered who I was. I never went back. I was so crushed. 

So I made up this name when I left San Francisco as a 17-year-old to come to college here in New York [at Columbia University]. I made up my own new persona. New York is a place where you can reinvent yourself. 

I was like the big dork in San Francisco that no one knew and no one would go out with. And I made up the name “Toshi” because he was the most popular kid at Washington High School, not in my school. I was at St. Ignatius. But he was the most popular; everyone loved him. I took his name. 

I became that guy: I started throwing parties, and girls started going out with me. Not because it was about me, but because I figured out that if I threw a party, girls would like me.

Clara Lorenz: That’s not why I’m together with him. 

Toshi: No. That’s all been squashed. But girls that would not talk to me, suddenly I became their best friend. Because my parties were good.

When I moved into my freshman room at orientation, I threw out all the furniture, painted the walls navy, put foil on the ceiling because I couldn’t afford mirrors. I threw out my desk, and I put in a bar. I was instantly the most popular guy. I got really terrible grades except in one course: mixology. I passed with flying colors. I was the fastest, best bartender. I was 18. Back then they weren’t cracking down on college drinking. People were just passing out on 160-proof vodka at my place. I was very popular. I was the man.

That’s where that came from: I took it from some guy who was actually popular—and reinvented myself. 

Did you ever talk to the original Toshi afterward? 

No, no. Because I don’t think he knew I existed.