Standard High Line Hotel’s $170M Foreclosure Suit Dropped
A foreclosure suit against the 338-key, four-star Standard High Line Hotel has come to a halt after two years.
Wells Fargo, the servicer for the CMBS trust that owns the debt on the building, had been seeking $170M via foreclosure from the hotel’s owner, Gaw Capital Partners. The lender dropped the case, according to court records reported by The Real Deal.
Commentary from the special servicer indicated that the loan, which has been in special servicing since June 2020, is under discussion for "potential reinstatement," which could close this month, according to Morningstar Credit. In May, the special servicer, CWCapital, said it was "proceeding with the exercise of remedies" on the loan.
Gaw, a private equity firm based in Hong Kong that manages $33.6B in assets globally, was given until July 1 to respond to legal filings by Wells Fargo, which was acting on behalf of the bondholders in possession of the loan.
Natixis originally provided the $170M acquisition loan for Gaw’s $340M purchase of the hotel in 2017. The loan for the hotel had a 10-year term and was later split into four promissory notes.
The hotel, located at 848 Washington St., hovers above Chelsea tourist destination the High Line. But when the pandemic decimated New York City’s tourism industry, the hotel missed payments between May 2020 and October 2021, and the suit alleged that Gaw owes as much as $187M to its lenders.
Hotels operating in NYC during fall 2021 were still struggling with the pandemic’s damage to business, with owners at the time telling Bisnow that they were “treading water.” While last summer saw occupancy almost back to pre-pandemic levels, owners were still struggling with debts incurred during the coronavirus-induced months of slow business.
Gaw previously disputed that it had missed payments, via a statement at the time that the suit was initially filed. Instead, the company said, multiple payments were in lender-controlled accounts. Gaw alleged at the time that Apollo Global Management, the controlling note holder, refused settlement offers “at market terms.”
The Standard High Line Hotel received a loan through the Paycheck Protection Program during the pandemic, preserving 468 jobs. It was one of more than 8,000 hotels to receive federal assistance during the pandemic, per The Real Deal.
Its performance has rebounded more recently. At the end of 2022, it recorded 88% occupancy, an average daily room rate of $502 and revenue per available room of $446, all of which are well above New York City's average, according to Morningstar.
The pandemic took a major chunk out of its valuation — last year, an appraisal valued the hotel at $244M, nearly $100M less than what Gaw paid in 2017, according to Morningstar.