Lenders Arden, Corten acquire Margaritaville hotel from Soho Properties valued at $150.4M

Arden Group and Corten Real Estate Partners through the entity AC MVTS Holdco, LLC acquired control through an October 2023 UCC auction of the Margaritaville Resort Time Square hotel (H2) at 560 Seventh Avenue in the Garment District, Manhattan, with a transfer value of $150.4 million. The prior owner was property developer Soho Properties, which owned it through the entity 560 Seventh Avenue Owner Secondary LLC.

The transfer closed on December 20, 2023 and was recorded on January 5, 2024. The property has 158,519 square feet of built space according to a PincusCo analysis of city data. The sale price per built square foot is $948 per the PincusCo analysis. (The price per square foot analysis is the transaction price divided by square feet as reported in public records and assumes no air rights have been sold.)
The seller bought the property on April 3, 2014, for $62.3 million.

In this action, Arden Group and Corten Real Estate Partners took control from Soho Properties of the 234-key Margaritaville Resort Times Square hotel at 560 Seventh Avenue in the Garment District through a UCC auction on October 16, 2023.

The transaction is an entity level transfer, not a deed transfer. It’s unclear what the $150 million refers to, but it close to the level of the original recorded debt of $167 million.

There were two mezzanine loans, one for $57 million and another junior mezzanine loan for $85 million.

Last year, Arden Group and Corten Real Estate Partners, which owned the $57 million mezzanine loan, sued Soho Properties. Soho Properties filed to place the project in bankruptcy, but on September 1, 2023, the bankruptcy court lifted the stay on the the UCC foreclosure auction.

A separate action that Arden and Corten filed to recover nearly $86 million in personal guarantees allegedly given by Sharif El-Gamal, Andrew Weiss and Stephen Weiss, from the mezzanine loans, remains active in state court. They allege that money is due because Soho Properties entity was placed in bankruptcy.

According to the Arden and Corten suit, in September 13, 2021, Arden provided a mezzanine loan of $57 million, then on July 22, 2022, Arden sold 50% of that note to Corten, so each held $28.5 million. When that fell into default, the total due was 1.5 times the original debt, minus payments but plus default interest, which totaled about $86 million.

The property

The hotel building in Garment District has 158,519 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 74 feet and is 125 feet deep with a total lot size of 9,876 square feet. The lot is irregular. The zoning is M1-6 which allows for up to 10 times floor area ratio (FAR) for manufacturing. The city-designated market value for the property in 2022 is $27.3 million. The most recent loan totaled $167 million and was originally provided by One William Street Capital Management on September 13, 2021.

Violations and lawsuits

The property was involved in four lawsuits and two bankruptcies over the past two years. The highest value suit was a $85 million money judgment concerning a loan filed on July 11, 2023, by Arden Group and Corten Real Estate Partners against Sharif El-Gamal, Andrew Weiss, and Stephen Weiss. The highest value bankruptcy was filed on July 9, 2023, by Soho Properties citing assets of $306 million. In addition, according to city public data, the property has received one DOB violation and $43,070 in OATH penalties in the last year.

Development

On the lot, there was one new building construction project for the Margaritaville hotel. The project was submitted by Soho Properties and filed by Sharif El-Gamal with plans filed March 24, 2015 and permitted January 17, 2019.

The neighborhood

In Garment District, The majority, or 69 percent of the 51.8 million square feet of commercial built space are office buildings, with hotel buildings next occupying 12 percent of the space. In sales, Garment District has 1.7 times the average sales volume among other neighborhoods with $539.9 million in sales volume in the last two years and is the 20th highest in Manhattan. For development, Garment District is the 6th most active neighborhood among other neighborhoods. It had 5.9 million square feet of commercial and multi-family construction under development in the last two years, which represents 11 percent of the neighborhood’s built space. There was one pre-foreclosure suit filed among other hotel buildings in the past 12 months.

The block

On this tax block, PincusCo has identified the owners of four of the nine commercial properties representing 403,316 square feet of the 755,385 square feet. The largest owner is Soho Properties, followed by Ng Tik Hong and then Heskel’s Asset Management.
On the tax block, there was one new building construction project filed totaling 118,143 square feet. It is a 167-unit, 118,143 square-foot hotel/dormitory/shelter (R-1) building submitted by Soho Properties and filed by Sharif El-Gamal with plans filed March 24, 2015 and permitted January 17, 2019.

The majority, or 53 percent of the 755,385 square feet of built space are office buildings, with hotel buildings next occupying 41 percent of the space.

The seller

The PincusCo database currently indicates that Soho Properties owned at least three commercial properties with 50 residential units in New York City with 337,883 square feet and a city-determined market value of $65.2 million. (Market value is typically about 50% of actual value.) The portfolio has $180 million in debt, with top three lenders as One William Street Capital Management, Blueberry Funding, and Realty Capital Finance respectively. Within the portfolio, the bulk, or 48 percent of the 337,883 square feet of built space are elevator properties, with hotel properties next occupying 47 percent of the space. They are all located in Manhattan.

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