New owner of West Side strip club building sues lender Mack Real Estate
The new controlling owner of the West Side parcel at 535 West 27th Street, which is home to the strip club Scores, sued its lender Mack Real Estate Credit Strategies over a 2018 loan totaling $130 million which was partially secured by the West Side building. When that deal was struck three years ago, involving a total of 21 tax lots, the properties were owned and controlled by affiliates of lumber and strip club owner, Robert Gans.
The new owner, whose identity was not disclosed other than through its name 534 West 28th Pref LLC, is seeking to remove ambiguity over ownership of the property, through an action known as “quiet title,” and to void the once-$130 million loan as it relates to this single property. For context, the prior debt on just the one building was $15.3 million in 2014. Mack has not filed response papers.
The court filings are the positions of one party and are not necessarily accurate or complete.
The new owner its claims in the summons that its 2018 joint venture operating agreement required unanimous consent for such a large loan, and Mack disregarded that. The loan was widely covered at the time, and totaled $148 million, according to the Commercial Observer, which did not disclose the mezzanine lender at the time.
The overall loan was reduced from $130 million in September 2019 and now covers just 11 properties and totals $116 million, according to refinancing documents.
Gans lost control this month, after the preferred equity partner, who was not disclosed but owned a stake through the entity 534 West 28th Pref LLC, completed a UCC foreclosure auction for the entity that controlled the building, 533 West 27 Street JV LLC. The foreclosure was announced by Mission Capital.
According to the summons, “The relief sought is a Judgment quieting title and granting declaratory relief, voiding and setting aside the Mortgage as against the Property based on the grounds that the Mortgage is ultra vires and was obtained without proper consent and authorization.”
According to the summons, “In 2021, the non-consenting Preferred Member ultimately foreclosed upon the Operating Member’s ownership of the JV such that the Preferred Member now wholly owns and controls the JV and all actions of the Property Owner. The Preferred Member for itself and on behalf of the Property Owner hereby seeks to rectify the unauthorized actions in 2018 taken in connection with the Mortgage Loan.”
Direct link to Acris document. link