Brooklyn hotel clings to hope with new bankruptcy filing

Facing foreclosure, downtown Brooklyn’s Tillary Hotel filed for bankruptcy last week in another example of New York’s hospitality woes.

The 174-room boutique hotel and residential building, located at 85 Flatbush Avenue, is owned by Isaac Hager’s Cornell Realty Management and its partners, including Rubin Equities. The owning entity filed a Chapter 11 petition with the New York bankruptcy court on Dec. 18.

FIA Capital Partners director David Goldwasser, a debt restructuring expert hired as bankruptcy property restructuring manager, said the hotel remained open. A UCC foreclosure auction on the hotel’s mezzanine debt scheduled for Dec. 18 has been halted due to the bankruptcy filing, Goldwasser said.


“The plan is to operate the hotel and increase occupancy, and get through the pandemic,” Goldwasser said. “The goal is to stabilize it…a Chapter 11 bankruptcy is supposed to reorganize. It keeps the dream alive.

Hager’s firm and partners paid $95 million for the building, which also includes 64 rental apartments and a 6,000 square foot parking lot, in September 2019. Madison Realty Capital provided a $76 acquisition loan. million dollars for the purchase.

Earlier this year, Eli Tabak’s Bluestone Group provided the ownership group with a $6 million mezzanine loan, which it defaulted on. The owners, doing business as 85 Flatbush RHO Hotel LLC, were notified in August that Bluestone is seizing the property.

According to Goldwasser, the hotel was closed at the start of the coronavirus crisis and operated as a homeless shelter in May and June. It reopened to the public on July 15 but operated at reduced occupancy, the owners said in the bankruptcy petition. In the filing, the hotel owner claims to have assets between $10 million and $50 million and liabilities between $50 million and $100 million.

Only five of the 64 apartments are occupied, the hotel owners said in the filing, and they plan to convert the apartments into condominiums if the hotel is allowed to emerge from bankruptcy.

His biggest unsecured creditors are Brooklyn-based security firm Greater Shield, which owes nearly $370,000, and Chesky Berkowitz, a leader of the Satmar community of Orthodox Jews in Brooklyn, who owes $250,000, according to the filing. .

The Tillary is far from alone in its financial difficulties. In New York alone, nearly a third of all hotels are behind on loan repayments, according to debt analysts Trepp, and several have closed permanently, including the Hilton Times Square and Embassy Suites in Midtown West. 14 New York City properties with loans in the commercial mortgage-backed securities universe are 60 days or more past due, according to Trepp.

CBRE Hotels Research reported that hotels were able to adapt to the COVID challenges they were facing and implement cost-cutting measures in early summer that allowed them to achieve a gross profit margin of (GOP) 16.7% through August, less than half of what they did last year. but enough to keep many afloat.

With a resurgence of COVID-19 and new travel restrictions enacted in many states, the American Hotel & Lodging Association (AHLA) reported that seven in ten hoteliers (71%) don’t think they can last another six months without help. additional federal. , which came Monday when the government announced its new $900 COVID stimulus package.

The bill includes reopening the Paycheck Protection Program for small businesses, which despite the flag’s affiliation with a major brand, most hotels are. Businesses that have taken out an initial PPP loan and can prove that their revenues have fallen by at least 25% will be eligible for a second loan under the program whose maximum loan amounts for hotel and restaurant operators have been increased to 3.5 times their average monthly payroll, according to the AHLA. .

But the hotel trade group said it will take years for hoteliers to get out of the pile of debt they have racked up during the pandemic.


On Monday, AHLA President and CEO Chip Rogers called the relief program a temporary lifeline, saying, “It will provide an essential lifeline for hotels and other businesses that have been decimated by the pandemic.

“Other priorities for the hospitality industry include a one-year extension of Troubled Debt Restructuring (TDR) relief so banks can continue to work with borrowers to secure forbearance and debt relief. additional debt, the deductibility of business meals until 2022 and the expansion of the tax credit for employee retention.

“We look forward to working with Congress and the new administration on a longer-term recovery plan that will ensure the survival of our industry and be well-positioned to help the country recover economically once the public health threat threatens. will have disappeared.”

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