Brooklyn’s Tillary Hotel Files For Bankruptcy
In yet another example of New York City’s hospitality woes, a boutique hotel and residential building that was facing foreclosure is now entering into bankruptcy.
The Tillary Hotel in Downtown Brooklyn, owned by Isaac Hager’s Cornell Realty Management and partners, including Rubin Equities, filed a Chapter 11 petition in New York bankruptcy court Friday. Calls to the 174-room hotel at 85 Flatbush Ave. Extension were not answered Friday afternoon, and its website didn’t allow bookings beyond Jan. 4 as of Friday evening.
FIA Partners principal David Goldwasser, a debt workout expert who has been enlisted as ownership's chief restructuring officer for the bankruptcy, said the hotel is staying open and that the website will be updated Monday. A UCC foreclosure auction over the mezzanine debt on the hotel scheduled for Friday was halted because of the bankruptcy filing, Goldwasser said.
“The plan is to operate the hotel and increase occupancy, and work through the pandemic,” Goldwasser told Bisnow. “The goal is to stabilize it … a Chapter 11 bankruptcy is meant to reorganize. It keeps the dream alive.”
Hager could not be immediately reached for comment.
His firm and its partners paid $95M for the building, which also features 64 rental apartments and 6K SF parking garage, in September 2019. Madison Realty Capital provided a $76M acquisition loan for the purchase.
Eli Tabak’s Bluestone Group issued the ownership group a $6M mezzanine loan, which it defaulted on, The Real Deal reported earlier this year. The owners, doing business as 85 Flatbush RHO Hotel LLC, were told back in August that Bluestone was foreclosing on the property.
The hotel was closed at the start of the coronavirus crisis and operated as a homeless shelter in May and June. It reopened to the public on July 15 but has been operating at reduced occupancy, the owners stated in the bankruptcy petition. In the filing, the hotel ownership claims it has assets between $10M and $50M and liabilities between $50M and $100M.
Only five of the 64 apartments are occupied, the hotel owners said in the filing, and they plan to convert the apartments into condominiums if the hotel is allowed to emerge from bankruptcy. Its largest unsecured creditors are a Brooklyn-based security company, Greater Shield, which is owed nearly $370K, and Chesky Berkowitz, a leader of the Satmar community of Orthodox Jews in Brooklyn, who is owed $250K, according to the filing.
It is not the first hotel in the city to be hit hard by this crisis. The Hotel Association of New York City predicts 20% of the city’s 124,000 hotel rooms won't reopen after the pandemic subsides. The Hilton Times Square, the W Hotel Downtown, The Roosevelt and Midtown’s the Maxwell and Omni Berkshire hotels have all announced they will close in recent months.