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Michael Shah’s Delshah Capital staved off default on the firm’s Israeli bonds tied to its New York City portfolio by filing for bankruptcy and securing a maturity extension, The Real Deal reports.
A $59M debt offering Delshah secured in 2016 for what would become the RH Guesthouse boutique hotel in the Meatpacking District was due to expire last month. The firm had arranged to sell the building at 55 Gansevoort St. to pay off what it owed, per TRD, but the buyer had backed off, raising doubts about Delshah's ability to meet its obligations on time.
That collapsed deal then pushed an agency to downgrade the debt, meaning the bonds were technically in default. To solve the problem, Shah and his company filed for Chapter 11 bankruptcy protection to fast-track the sale of another property, 100 Christopher St., to Lions Group, a $30M transaction that was agreed to in August.
Bondholders agreed Delshah could pay down the debt from the Christopher Street sale instead, a source told TRD. Delshah got an extension of the debt maturity to Dec. 31 and has agreed to sell 55 Gansevoort as part of the arrangement, per the publication.
Meridian had been marketing the property, which houses Restoration Hardware’s hotel, and Delshah had been hoping to secure a price of $72M. Chapter 11 protects Delshah from the bondholders seizing control of the business.
Shah ran a two-part bond offering in Israel in 2016 tied to its portfolio, raising 400M shekels (then around $102M) to be traded on the Tel Aviv Stock Exchange. One piece of those offerings was tied to an affordable housing portfolio, while the other was the source of the would-be default.
Shah founded the company with its first acquisition in 2006, a 60-unit property at 1314 Seneca in Hunts Point, selling it for a $1M profit in 2012, Bisnow previously reported. Through the Great Recession, he grew his investments with a Department of Housing and Urban Development-backed Staten Island affordable housing property, a student housing building in Brooklyn and a co-op conversion in Manhattan.
The company now employs 50 people, according to its website, and has a 2M SF portfolio valued at $1.2B.
Chapter 11 has emerged as a key part of many New York real estate businesses’ approach in the wake of the pandemic and amid the current economic climate. This summer, Soho Properties filed bankruptcy petitions for two separate entities attached to its Margaritaville Resort Times Square in an attempt to keep lenders seeking foreclosure at bay.
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