A Luxury Midtown Hotel In Default Could Fall Into The Reuben Brothers’ Hands

The 76-room luxury Chatwal Hotel could soon be in the possession of its mezzanine lender, an investment vehicle owned by billionaires the Reuben Brothers, after the hotel defaulted on its mezzanine debt last December.
The 76-Room Luxury Chatwal Hotel Could Soon Be In The Possession Of Its Mezzanine Lender, An Investment Vehicle Owned By Billionaires The Reuben Brothers, After The Hotel Defaulted On Its Mezzanine Debt Last December.

The Chatwal, a luxury hotel in Midtown Manhattan, is scheduled to hit the auction block next month after the billionaire holders of its mezzanine debt put the ownership in default.

The hotel, located at 130 West 44th St., defaulted on a mezzanine loan from billionaire brothers David and Simon Reuben’s investment vehicle, Motcomb Estates, Bloomberg reports. Consequently, the Reubens filed a nonjudicial foreclosure proceeding on The Chatwal, triggering an auction and placing the mezzanine lender first in line for ownership.

The auction on the 76-room hotel, which is part of Hyatt Hotels’ global system, is scheduled for Jan. 17. Operations will continue as normal through any ownership changes, a representative for Hyatt told Bloomberg.

Adams Hotels International is linked to The Chatwal via property records filed with the city. However, Dubai businessman Iyer Vaidyanathan Narayan is listed as the loan’s guarantor in the pre-foreclosure suit, according to Bloomberg.

Narayan is also being sued in New York State Supreme Court, PincusCo reported. The suit alleges that Narayan used fraudulent funds for his $115M purchase of the hotel in 2013.

By the time the auction rolls around, the mezzanine debt’s high interest rates could bring its value to as much as $79M, according to Newmark Group, which is marketing the sale. The initial balance on the loan when the borrower defaulted last December was $62.5M, with the loan originated just months before the pandemic began, in December 2019.

Some of New York City’s biggest hotels have run into difficulties with their lenders since the pandemic began, with a slow rebound of the tourism sector combined with a dearth of business travel eating into revenues, while high interest rates have made it more difficult to refinance.

The Reuben brothers, with a combined $14B net worth, originally came from commodity trading but have since become major players in commercial real estate. In recent years, they have made a series of opportunistic plays for projects via a “loan-to-own” model.

They have been an increasingly big figure on the NYC commercial real estate scene since the pandemic began, buying up luxury retail buildings from Vornado and the Surrey Hotel on the Upper East Side, among other acquisitions.

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