March 23 (Bloomberg) -- The W New York Union Square hotel was put into bankruptcy by the junior mezzanine lender that took over ownership of the Manhattan luxury property in December from Dubai World.
Hotels Union Square Mezz 1, an entity controlled by junior lender LEM that owns the hotel, filed for bankruptcy in Delaware, saying it owes creditors as much as $100 million, according to bankruptcy papers filed in Delaware. The Chapter 11 reorganization stops a foreclosure auction that was scheduled tomorrow by the senior mezzanine lender, DekaBank Deutsche Girozentrale.
“This means the foreclosure proceeding originally scheduled for tomorrow won’t be taking place,” said David Gutstadt, a senior vice president in New York for Savills LLC, DekaBank’s adviser.
LEM, an affiliate of Lubert-Adler Real Estate Funds, paid $2 million at a foreclosure auction on Dec. 8 to assume the debt on two mezzanine notes as well as the mortgage payments on the hotel after Dubai World defaulted. A month later, DekaBank announced its intention to foreclose on the hotel unless loan payments were brought up to date.
Today’s filing was a so-called bare-bones petition that wasn’t accompanied by the usual requests for relief that are typical on the first day in a major Chapter 11 reorganization.
DekaBank is the largest unsecured creditor and has a claim of $60 million, according to the filing.
“People put properties in bankruptcy all the time to stop foreclosures,” said Ben Thypin, senior market analyst at New York-based research firm Real Capital Analytics Inc. “But this story is not over. The foreclosure could still go through sometime down the line. This doesn’t get them out of trouble, it just buys them some time to restructure the debt.”
Real estate could be the biggest trouble spot for the foreseeable future. Ben Thypin, senior market analyst with New York consultant Real Capital Analytics, said all big real estate investors are continuing to struggle with post-bubble economics.
"I don't think it's going to get much worse," he said, referring to the market in general and not the California pension funds' investments. "That doesn't necessarily mean there won't be other bombshells."
Read More: http://www.mcclatchydc.com/2010/03/12/v-print/90300/california-pension-funds-get-burned.html
Ben Carlos Thypin
I am currently the co-founder of Quantierra, the world's first data driven real estate brokerage and investment manager. In my former life as Director of Market Analysis at Real Capital Analytics, I worked with press outlets large and small to provide them with great data and insightful commentary. Here are some of the results of this collaboration. For the rest, please check out the News Archive.