Merchants Hospitality surrenders $24M Hell’s Kitchen ground lease to BD Hotels

A Merchants Hospitality affiliate last month surrendered its $24 million ground lease controlling the Cachet Boutique New York Hotel, at 510 West 42nd Street, to the fee owner, Richard Born’s BD Hotels, according to court documents filed Friday as part of a lawsuit over a loan secured by the property.

In the complaint, lender Taconic Capital Advisors is seeking repayment of a defaulted 2019 leasehold loan with an original principal of $40 million and a current total debt of $66 million. The borrower, Merchants Hospitality, surrendered the ground lease on December 6, 2023.

Case LINK

Court records represent the position of one party and are not necessarily accurate or complete. The building has also been subject to a $35 million money judgment and a $42 million bankruptcy.

Taconic Capital Advisors, which has offices in New York and London,  is not affiliated with Charles Bendit’s Taconic Partners.

Merchants Hospitality acquired the ground lease in a transaction valued at $24 million in 2017 from Parkview Developers, and then in 2019 borrowed $42 million from Taconic Capital Advisors.

According to the complaint,”The Debt consists of the initial $40 million principal amount (which was supposed to be repaid at maturity in December 2020) as well as interest and any other amounts owing to Lender with respect to the Loan (defined below).

“As of the date hereof, the “Debt” amounts to $66,665,731… By letter dated December 4, 2023 (the “December 4 Letter”), Borrower admitted in writing that it ‘lacked sufficient funds to satisfy its obligations in connection with the [hotel] and under the Loan Agreement’… Shortly before sending the December 4 Letter, Borrower failed to pay the rent on the ground lease for the hotel (the “Leasehold”). Borrower also stated in the December 4 Letter that Borrower intended to tender the Leasehold to Borrower’s landlord, the Ground Lessor (defined below)….

“The Ground Lessor accepted that surrender on December 12, 2023… Accordingly, Guarantors are now required to pay Lender the full amount of the Debt. But as of the date of this filing, and despite Lender’s demand, Guarantors have not repaid the Debt in full. ”

Crain’s reported in October 2023 that Merchants Hospitality had shut down the 105-key hotel.

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