Beleaguered Hotel Chain LuxUrban Files For Bankruptcy

Staring down dozens of lawsuits from investors, vendors, landlords and unions, LuxUrban Hotels has entered bankruptcy.

LuxUrban once controlled more than 1,000 rooms in at least four cities, but it has just four remaining hotels in New York City, according to its Chapter 11 bankruptcy petition filed Sunday in the U.S. Bankruptcy Court for the Southern District of New York.

The company has less than $10M in assets but more than $15M in secured debt and over $22M in unsecured claims from creditors, according to the petition.

Its debt issues have been a consistent drain on its cash flow, according to a declaration filed with the petition, written by Chief Financial Officer Michael James. The most onerous debt came from several merchant cash advances it has taken out from lenders such as Speedy Funding and Capital Assist LLC, of which $5.2M remains outstanding.

The company, which traded on the Nasdaq Stock Market until January, plans to exit Chapter 11 as a privately held company after negotiations with its secured creditor. 

The company has $14.9M in senior debt held by Greenle Partners, a Saddle River, New Jersey-based investment entity that has been a longtime investor and lender to LuxUrban, which converted some of its equity into debt that matured prior to LuxUrban’s Chapter 11 filing.

“Chapter 11 was the most effective tool to reset our financial foundation,” James said in a statement. “With the backing of our lenders and creditors, we are confident LuxUrban will emerge as a stronger, more agile private company.”

The specific ownership structure and size of the restructured company will become clearer in the coming weeks and months, LuxUrban’s lead restructuring counsel, Leo Jacobs, told Bisnow by phone Monday morning.

“The process is developing, so it will take shape in the first 90 days of the filing,”  said Jacobs, founder of law firm Jacobs PC.

LuxUrban said it owes $7.8M to vendors and unsecured creditors, not including amounts linked to pending litigation. It is a defendant in dozens of lawsuits, it disclosed in the bankruptcy petition. It also owes more than $14M to its landlord at the 125-room Tuscany Hotel at 120 E. 39th St., which is among the entities suing it for unpaid rent or fees.

The declaration discloses that the company plans to reject “unfavorable” leases, but it doesn't specify which ones. It also still leases The Herald, a 168-key hotel at 71 W. 35th St., the 74-bed Hotel 27 at 21 E. 27th St., and the 79-room Hotel 46 at 129 W. 46th St., which isn't operating and was leased as a temporary migrant shelter.

The company went public in 2022 and raised $13.5M to fund its pivot from CorpHousing Group, a short-term rental business, to LuxUrban Hotels, which master leased shuttered properties during the pandemic and operated them as budget-friendly hotels.

But shortly after its initial public offering, multiple industry experts told Bisnow that LuxUrban's financial picture appeared “unsustainable,” with mounting lease liabilities and not enough money coming in. A Penn State business professor called it “WeWork, but for hotels.” 

Nevertheless, it continued growing and leasing up properties. In January 2024, LuxUrban told investors it controlled more than 2,000 rooms across 18 properties, with plans to grow to 12,000 rooms in a year's time. 

But while it was opening new properties, it had a growing list of landlords and vendors that claimed they had been stiffed. LuxUrban and its subsidiaries have been sued on at least 80 occasions since 2022, including suits from a majority of the landlords it has signed leases with. 

It also claimed in Securities and Exchange Commission filings to have at least two properties “under lease” that it later admitted it had never executed leases on, as Bisnow first reported.

The discrepancy is one of the claims in a class-action lawsuit alleging that the company and its founder and former CEO, Brian Ferdinand, defrauded investors. LuxUrban also had to restate its financials last year after admitting that it improperly classified certain revenue and understated its expenses.

LuxUrban was also fined $1.2M by the NYC Mayor’s Office of Special Enforcement over illegal short-term rental operations. It agreed to pay the fine in 2024, but in April, the city sued LuxUrban for failing to pay, accusing it of bouncing a check.

The Office of Special Enforcement is listed as an unsecured creditor in the bankruptcy petition, owed $1,228,997.

The hotelier has been evicted by some of its landlords and has driven others to financial distress. The owners of The Tuscany have sued LuxUrban for $4.7M in back rent, which they claim pushed them into default on a $60M mortgage at the property, which is the subject of a foreclosure lawsuit, Crain’s New York Business reported last month.