Premier Finishes Deal to Take Control of Troubled Flatiron Hotel
Premier Equities has finalized its deal to bail out the ownership of Manhattan’s beleaguered Flatiron Hotel.
A source close to the deal confirmed to Commercial Observer that Premier has followed through on its plan to pay down debt on the property owed by the hotel’s proprietor, Jay Vaswani, becoming the majority owner of the property in the process. Premier, led by Uzi Ben Abraham, Yaron Jacobi and Bert Dweck, pinned down $30 million in financing from Israeli Discount Bank, an institution based in Tel Aviv, according to the source, to take over the hotel and cover its balance with its creditors.
Meanwhile, Michael Shah’s Delshah Capital now controls the building’s mortgage after the debt was transferred to Shah’s company by the Flatiron’s CMBS special servicer, Wilmington Trust. Shah confirmed in an email that he picked up both the senior and junior debt.
After Vaswani’s operating entity filed for bankruptcy last summer, Premier stepped in to offer debtor-in-possession financing, which shielded the Flatiron Hotel, at 9 West 26th Street between Broadway and Avenue of the Americas, from creditors that aimed to foreclose. Vaswani had taken out a $25 million CMBS loan against the 64-room hotel that was originated by Rialto Capital in 2015, but the loan ran into trouble amid financial difficulties as well as a dispute between Vaswani and his onetime partner, Robert “Toshi” Chan.
Chan had been responsible for the hotel’s food and beverage outlets, Toshi’s Living Room and Toshi’s Penthouse. But after Vaswani removed Chan from his role at the hotel, Rialto and Wells Fargo (WFC), which securitized the loan, complained in a lawsuit that the lodging was being run without a valid liquor license, because only Chan had been connected to the document. Other evidence presented in the lawsuit pointed to financial mismanagement by Vaswani’s staff.
As part of the deal, Chan won’t be continuing in his role at the Flatiron, he confirmed to Commercial Observer, although he declined to specify the details of his exit arrangement.
“I’ll miss the music that we brought to New York City” at his eponymous entertainment venues, Chan said, adding that he wished Premier “the best of luck” with the property.
Vaswani will remain a partner with Premier in the hotel going forward, a second source involved with the asset confirmed.
The Flatiron is one of a group of chic hotels, along with the NoMad and the Ace Hotel, which opened on the blocks north of Madison Square Park in the last ten years, and which have helped build up what had long been a seedy stretch of low-rent storefronts. But the NoMad has also run into trouble. This spring, the property’s mezzanine lender, Colony Financial, moved to force a Uniform Commercial Code foreclosure sale of the property.
Representatives for Premier declined to comment.
With additional reporting by Chava Gourarie.