Real Estate Developers Lose Control of Williamsburg Hotel Amid Possible Fraud Concerns - The Jewish Voice
82.3 F
New York
Thursday, June 30, 2022

Real Estate Developers Lose Control of Williamsburg Hotel Amid Possible Fraud Concerns

- Advertisement -

Related Articles

-Advertisement-

Must read

Real Estate Developers Lose Control of Williamsburg Hotel Amid Possible Fraud Concerns

Edited by: TJVNews.com

There’s never a dull moment on the real estate scene in the New York City area, and this time is no exception. According to a June 6th report on the Commercial Observer web site,  “a federal bankruptcy court judge removed developers Michael Lichtenstein and Toby Moskovits from control of the bankrupt Williamsburg Hotel in Brooklyn, after finding that the two might have committed fraud and can’t be trusted with their swanky flagship property.”

The Williamsburg Hotel has 147 rooms and is located at 96 Wythe Avenue, between North 10th and North 11th Streets in the Williamsburg section of Brooklyn. The Commercial Observer has reported that the hotel is a major part of the Moskovits and Lichtenstein’s Heritage Equity Partners’ Brooklyn portfolio.

The report indicated that an independent trustee had been placed in control of the hotel by Judge Robert Drain at the end of May. According to a report on The Real Deal web site, the judge in the case stated that he  “cannot trust the debtor’s principals” to uphold their fiduciary duties.”

After nearly a year of defaulting on its loans, Heritage filed for bankruptcy on the property in February 2021, according to the report in the Commercial Observer.

When addressing the defendants who are still owners of the building but have relinquished their operational responsibilities, the judge admonished Lichtenstein to not do anything that would be deleterious to himself in terms of the case and the charges against him, according to the report.

The Real Deal reported that Judge Drain said, “Lichtenstein comes across as a very volatile person who is prepared to take stances that if one would just step back and think about them, don’t make a lot of sense. And I do have some concern that he’ll do something really stupid here.”

The Commercial Observer previously reported that the Williamsburg Hotel is facing foreclosure from its lender, Benefit Street Partners, which gave Heritage a $68 million loan in 2017 after the firm bought the lot in 2012 for $4.85 million. Subsequent to the hotel experiencing low occupancy and the drop in revenue caused by it, Heritage defaulted on that loan in 2019. A spokesperson for the firm told the Commercial Observer that Heritage “has done well to steer the hotel through the pandemic and would pay off its creditors and conclude the bankruptcy process in the near future.”

In a statement issued, the spokesperson for Heritage said: “Ownership invested significant amounts of equity into the Williamsburg Hotel and followed that up with additional loans to support the opening period, a small portion of which loans were repaid well before the bankruptcy.  Throughout this process, we have worked closely with our excellent team as we brought the Williamsburg Hotel to the amazing success it is today. We achieved this result in one of the most difficult periods for the hospitality industry.”

The Commercial Observer previously reported that despite receiving “offers from bidders to purchase the hotel for $135 million in 2019, Moskovits denied that she would put the hotel up for sale and almost arranged a $76 million refinancing to cover its default — but the deal never closed.”

In the aftermath of the hotel declaring bankruptcy last year, attorneys from Benefit Street Partners alleged that Heritage siphoned money out of the property instead of paying its debts, according to the CO report. The CO report also indicated that an investigation that was appointed by the court and was backed up Benefit’s claims discovered that Moskovits and Lichtenstein “obstructed the investigation, failed to pay taxes and engaged in a “complex scheme” to divert millions from the debtors,” according to the investigator’s report.

The Real Deal reported that Lichtenstein criticized Benefit and another lender, Fortress Investment Group, saying in court filings that the two are “in a competition on who is the biggest asshole lender in New York City.” Heritage’s legal team disputed the fraud allegations, saying that any funds went to pay the debtor and that Heritage had no taxable income before the bankruptcy declaration.

Moreover, Judge Drain took the side of the allegation by Benefit that Moskovits and Lichtenstein misused a federal Paycheck Protection Program loan that was given to them during the Covid crisis.  The judge said the loan, for the most part, was not spent on compensating hotel employees. The CO report indicated that Heritage has disputed this claim of wrongdoing.  The Heritage spokesperson said that the loan was used “for purposes intended by the program — to keep its team employed through the COVID challenges.”

 

balance of natureDonate

Latest article

- Advertisement -
EnglishHebrew
Skip to content