ACRES Capital alleges AJ Capital default on $76.5M loan secured by Roosevelt Island hotel lease

An affiliate of lender ACRES Capital filed a lawsuit on April 22, 2026, alleging AJ Capital Partners defaulted on a $76.5 million loan secured by a now-terminated leasehold covering, 22 North Loop Road, the Graduate by Hilton New York hotel building on Roosevelt Island.

The action, brought by AMF Levered II, LLC and ACRES Real Estate SPE 10, LLC, seeks more than $79 million in outstanding debt and interest from the guarantor, Graduate Hotels Real Estate Fund III LP, an affiliate of AJ Capital Partners. The Real Deal was the first to report on the litigation, which marks the culmination of months of operational distress at the 224-key property.

Case LINK

The 18-story hotel, located on the Cornell Tech campus, abruptly ceased operations on November 25, 2025, the filing says. The closure occurred approximately 20 months after AJ Capital Partners sold the Graduate Hotels brand to Hilton Worldwide for $210 million while retaining the underlying real estate.

AJ Capital Partners through the entity Graduate Roosevelt Island Lessee LLC as borrower signed a loan with lender ACRES Capital’s Acres Loan Origination, LLC valued at $76.5 million for the hotel building (H2) at 22 North Loop Road in Roosevelt Island, Manhattan. The loan closed on September 30, 2022 and was recorded on October 28, 2022.

The legal filing follows a series of defaults that began in mid-2025. According to court documents, the borrower failed to fund required replacement reserves and debt service reserve accounts starting in August 2025. The lender also alleged the borrower failed to pay legal and advisory fees associated with workout requests. These defaults prompted a formal notice of acceleration on October 10, 2025.

The situation escalated when Cornell University, as ground lessor, issued notices of default citing the borrower’s failure to maintain the “Hotel Operating Standard” and its failure to pay utility charges. Cornell officially terminated the 65-year ground lease on April 9, 2026. Under the terms of the 2022 loan agreement, the termination of the ground lease served as a “full recourse trigger,” making the guarantor liable for the entire outstanding debt.

Lead counsel for the plaintiffs, William A. Brewer III, stated that the guarantor’s obligations became absolute once the lease was terminated due to the property’s abandonment. The plaintiffs have moved for summary judgment in lieu of a complaint, arguing that the documentary evidence, including the guaranty and lease termination notice, leaves no triable issues of fact. The total claim amount of $79,272,362.72 includes the principal balance, accrued interest at the default rate, and various enforcement costs.

The property

The hotel building in Roosevelt Island has 142,554 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 159 feet and is 166 feet deep with a total lot size of 18,555 square feet. The lot is irregular. The zoning is C4-5 which allows for up to 3.4 times floor area ratio (FAR) for commercial and up to 3.44 times FAR for residential. The city-designated market value for the property in 2022 is $34.5 million. The most recent loan totaled $76.5 million and was provided by ACRES Capital on September 30, 2022.

Prior sales, articles and revenue

The 142,554-square-foot property generated revenue of $11.3 million or $79 per square foot, according to the most recent income and expense figures.

Development

NYC Economic Development Corporation submitted a new building construction project for a 36,309 square-foot business (B) building at 34 North Loop Road. The plan was filed on May 23, 2017 and was permitted on December 26, 2018. It calls for the construction of a 70-foot tall, four-story building and was filed with the New York City Department of Buildings under job number 121203768. The project is described in the filing as: application filed to erect a 4 story new building (eec building.

For the tax lot building, it received its initial certificate of occupancy on October 25, 2017.

Violations and lawsuits

According to city public data, the property has received $750 in OATH penalties in the last year.

There were no lawsuits or bankruptcies filed against the property for the past 24 months.

The neighborhood

In Roosevelt Island, The majority, or 59 percent of the 2.4 million square feet of commercial built space are elevator buildings, with specialty buildings next occupying 35 percent of the space. In sales, Roosevelt Island has not had any sales in the last two years. For development, Roosevelt Island has not had any major developments in the last two years.

The block

On this tax block, PincusCo has identified the owners of five of the 13 commercial properties representing 1,863,619 square feet of the 2,403,876 square feet. The largest owner is Aj Capital Partners, followed by L+M Development Partners and then Nyc Health + Hospitals. On the tax block, there were three new building construction projects totaling 306,088 square feet. The largest is a 365-unit, 268,800 square-foot residential (R-2) building submitted by Related Companies and filed by Jamar Adams with plans filed September 4, 2019 and permitted March 29, 2023. The second largest is a 36,309 square-foot business (B) building submitted by NYC Economic Development Corporation and filed by Richard Cote with plans filed May 23, 2017 and permitted December 26, 2018.

The owner

The PincusCo database currently indicates that Aj Capital Partners owned at least one commercial property in New York City with 142,554 square feet and a city-determined market value of $29 million. (Market value is typically about 50% of actual value.) The portfolio consists of at least a single hotel property. It is located in Manhattan.

The owner according to the Department of Housing Preservation and Development is Diego Oneill, head officer. The business entity is Graduate Roosevelt Island Lessee Llc.

The surrounding

This is the first commercial real estate event of interest identified within the 400-foot radius of 22 North Loop Road in the past 24 months.

Direct link to the property’s ACRIS page and link to DOB NOW portal.